Pension regulator writes to GOI seeking amendment to PFRDA Act

The Pension Fund Regulatory and Development Authority (PFRDA) has written to the government of India, seeking changes in the PFRDA Act to make it the sole regulator for all pension products sold in the country.

In an interaction with Moneycontrol, Supratim Bandyopadhyay, Member (Finance), Pension Fund Regulatory and Development Authority (PFRDA), said that they had proposed some changes in the PFRDA Act and discussed it with the government.

“We have told them (government of India) very clearly that let there be a single regulator for the pension sector. We are seeking an amendment to the PFRDA Act making the body the single regulator for all pension products,” he added.

PFRDA, established in 2003 with the intent of selling pure-play pension products, has for long lobbied for the exclusive right to be the watchdog. While an expert committee was set up the finance ministry on this matter, no decision was taken.

Currently, it only regulates the pension plans sold under National Pension Scheme and Atal Pension Yojana.

In earlier discussions with the finance ministry, PFRDA suggested that they be allowed to regulate all pension products that exist in the Indian market. Further, the regulator has sought that the word 'pension' to be attached to only those products that were approved and regulated by them.

Why a single regulator?

PFRDA wants that all confusion related to pension products be removed with a single regulator looking into all the products sold for post-retirement regular income purposes.

Bandyopadhyay also explains that, once there is a single regulator, it will be easier for the customers who often get confused between multiple products.

At present, pension products having retirement benefits, as well as annuity components, come under the ambit of multiple regulators. Once a single regulator is appointed, all product approvals and regulations related to pension products will be streamlined through one channel.

IRDAI regulates the pension and annuity products sold by insurers while Securities and Exchange Board of India (SEBI) regulates mutual funds’ pension plans.

Further, Employees’ Provident Fund Organisation’s PF scheme is also considered as pension whereas it only provides a retirement lump sum benefit and not a regular income.

How will customers benefit?

Customers will not be required to deal with multiple regulators while buying a product. There have also been complaints of insurance companies selling regular products as NPS to unaware customers.

If PFRDA is made the sole regulator, all pension products will come under their purview. Further, this will also reduce the cases of misselling of insurance plans as pension products since there could also be a cleaning up of the product portfolios.

Any product using the word ‘pension’ will have to go through the regulatory clearance process of PFRDA once the law is changed. This will help product features get standardised across the companies.

This is not the first time that the regulation of a product has come under discussion. In 2010, SEBI and IRDAI locked horns over who would regulate unit-linked insurance plans (Ulips) that also had an element of being linked to the equity markets. The government intervened and decided that Ulips would come under the jurisdiction of IRDAI.