PFRDA may regulate unregulated pension funds

The Department of Financial Services (DFS), which functions under the finance ministry, is examining a proposal to bring all unregulated retirement funds under the purview of the Pension Fund Regulatory and Development Authority (PFRDA).

DFS is looking at forming a panel to look into the matter and study the scale of unregulated superannuation funds in the country to protect subscribers' interest.

"There is a proposal to have a single regulator for superannuation funds. It is difficult to say how many such funds are there across the country," said a government official.

It is not clear whether pension products floated by mutual funds or insurance companies would also come under PFRDA, as these are already regulated by the Securities and Exchange Board of India (Sebi) and the Insurance Regulatory and Development Authority of India (Irdai), respectively.

"The idea is basically to reduce the grey areas and close down the regulatory gaps," said Hemant Contractor, chairman, PFRDA. The matter is complex as multiple ministries are involved - for example, the ministry of labour is involved in matters related to payment of gratuities, said the official. He added that a panel would sort out the matter.

PFRDA has been pitching that all unregulated pension funds in the country be regulated. Under the proposed PFRDA Act, the pension regulator is responsible for promoting the pension fund industry and protecting consumers by supervising these funds. Currently, it is responsible only for regulating the National Pension System (NPS) and the Atal Pension Yojana.

A number of companies extend superannuation schemes to employees through insurance companies or set up their own PF trusts. Many of these trusts are under the ambit of Sebi, Irdai or EPFO. They all seek tax exemptions from the Central Board of Direct Taxation (CBDT).

PFRDA has been trying to accumulate information on existing pension and superannuation schemes being run by various entities and details of their regulatory jurisdiction, supervisory mechanism, investment guidelines, risk management strategies, number of subscribers and assets under their management.

The G N Bajpai Committee had in its report called for a unified pension regime and regulations. PFRDA came into existence after the Pension Fund Regulatory & Development Act was notified in February 2014.

REGULATING PENSION FUNDS

• There is a proposal to have a single regulator for all superannuation funds
   
• Matter is complex as multiple ministries are involved
   
• It is not clear whether pension products floated by mutual funds or insurance companies would also come under PFRDA
   
• Idea is basically to reduce grey areas and close down regulatory gaps