Tuesday, Sep 27, 2022
Outlook Money

National Pension System: What Are Pension Fund Managers And How Do They Function?

The PFRDA has appointed Tata Pension Management Limited as the latest pension fund manager under the NPS. But what are pension fund managers and what are their functions? Who are the other pension fund managers appointed under the NPS Trust to manage pension funds?

PFRDA recently appointed Tata Pension Management Limited as a pension fund manager for managing the funds under the National Pension System. 

The Pension Fund Regulatory and Development Authority (PFRDA) recently appointed Tata Pension Management Limited (TPML) as a pension fund manager (PFM) for managing the funds under the National Pension System (NPS). 

So, what exactly is a pension fund manager (PFM)?

Put simply, a pension fund manager manages the pension fund. Under the NPS, a pension fund executes the following tasks: 

    Receiving of subscribers’ funds from trustee banks for investments in accordance with subscriber preferences.
    Investing the funds in securities prescribed in the investment guidelines issued by PFRDA and the investment policy as approved by the Board of Pension Fund.
    Constitution of Investment Committee and Risk Management Committee.
    Construction and review of scheme portfolio in compliance of prudential exposure norms and scheme objective.
    Maintenance of proper books of accounts for the schemes managed by the pension fund.
    Declaration of the scheme’s net asset value (NAV) at the end of each working day and communicating to the central recordkeeping agency (CRA) for unitisation in subscriber’s PRAN.
    Periodic reporting of its operational activities to NPS Trust.

The pension funds registered under the NPS are bracketed under two categories: 
1] Pension Funds for the Government Sector, and 
2] Pension Funds for Other Than Government Sectors

There are three pension funds for the government sector, namely, SBI Pension Funds Pvt. Ltd., LIC Pension Fund Ltd., and UTI Retirement Solutions Ltd.

The seven pension funds for other than government sector are: SBI Pension Funds Pvt. Ltd., LIC Pension Fund Ltd., UTI Retirement Solutions Ltd., HDFC Pension Management Co. Ltd., ICICI Prudential Pension Fund Management Co. Ltd., Kotak Mahindra Pension Fund Ltd., and Aditya Birla Sunlife Pension Management Ltd.

Now, effective August 18, 2022, Tata Pension Fund Management Limited has also been appointed as a pension fund manager for maintaining pension funds under the NPS.

At present, these pension funds together maintain a total of 13 schemes under the NPS, including among others, the central and state government schemes, Atal Pension Yojana, NPS Lite, NPS Tax Saver Scheme (Tier-II), and corporate CG scheme, schemes E, schemes C and so on.

Monitoring Of Pension Fund By NPS Trust

The NPS Trust also monitors the pension funds for compliance at regular interval.

The NPS Trust undertakes annual or periodic inspection and/or audit or both of the pension fund either directly or through its authorised representative as specified by the PFRDA. This is in accordance with the stipulation for audit of pension funds under Regulation 32 of the PFRDA (Pension Fund) Regulation, 2015.

As part of the monitoring process, the NPS Trust also conducts regular reviews of the internal and external audit reports, periodic reports, as well as the observations/exceptions/deviations to the PFRDA in compliance to PFRDA (NPS Trust) Regulations, 2015 and PFRDA (Pension Fund) Regulations, 2015, including the subsequent amendments.

Lastly, the financial statement of the schemes are approved at a meeting of the board of directors of the pension fund, and forwarded to the NPS Trust for approval in compliance with Regulation 19 of PFRDA (Pension Fund) Regulations, 2015.