Pension Regulator PFRDA Reconstitutes Advisory Committee : Daily Current Affairs

Relevance: GS-2: Structure, Organization and functioning of the Executive and the Judiciary—Ministries and Departments of the Government.

Key Phrases: PFRDA, PAC, General Provident Fund, Atal Pension Yojana, Pension Fund, CII National Committee, NPS Trust, assets under management.

Recently Pension regulator Pension Fund Regulatory and Development Authority (PFRDA) has reconstituted the Pension Advisory Committee (PAC).

The reconstituted Panel has 18 members besides the PFRDA Chairman as its ex-officio Chairman and six PFRDA Board members as the ex-officio members of the PAC.
It may be recalled that the PFRDA Act stipulates that PAC cannot have more than twenty-five members, excluding ex-officio members, to represent the interests of employees’ associations, subscribers, commerce and industry, intermediaries, and organizations engaged in pension research.
PAC can advise PFRDA on matters referred to it, and on such matters as the Panel may deem fit.
The Panel is required to meet at least twice a year.
Every meeting of the PAC has to be presided over by Chairperson (PFRDA Chairman).
Each member of the PAC — other than ex-officio members — will have a term of office of three years from the date of nomination by the Authority.

It is the regulatory body under the jurisdiction of Ministry of Finance, Government of India for overall supervision and regulation of pension in India.
On 23 August 2003, Interim Pension Fund Regulatory & Development Authority (PFRDA) was established through a resolution by the Government of India to promote, develop and regulate pension sector in India.
The Authority consists of a Chairperson and not more than six members, of whom at least three shall be whole-time members, to be appointed by the Central Government.

The Union government under Prime Minister Atal Bihari Vajpayee took a decision in 2003 to discontinue the old pension scheme and introduced the NPS.
NPS was made mandatory for all new recruits to the Central Government service (except the armed forces) from 1st January, 2004.
On introduction of NPS, the Central Civil Services (Pension) Rules, 1972 were amended.
It is a participatory scheme, where employees contribute to their pension corpus from their salaries, with matching contribution from the government.
The funds are then invested in earmarked investment schemes through Pension Fund Managers.
At retirement, they can withdraw 60% of the corpus, which is tax-free and the remaining 40% is invested in annuities, which is taxed.
It can have two components - Tier I and II.
Tier-II is a voluntary savings account that offers greater flexibility in terms of withdrawal, and one can withdraw at any point of time, unlike Tier I account.
Even private individuals can opt for the scheme.

After Rajasthan, it is now the turn of Chhattisgarh that wants to pull out of the National Pension System (NPS).
Chhattisgarh government has written to PFRDA seeking a refund of the money deposited towards NPS since November 2004 along with accruals.
From 1st April, 2022, Chhattisgarh government had stopped the monthly contribution of employer and employee to the NPS accounts of employees.
A new General Provident Fund (GPF) account has been opened by the State Government for each employee registered with NPS and the principal amounts contributed by the employees in their NPS accounts are proposed to be transferred to the Chhattisgarh GPF accounts of the employees.

The Department of Personnel and Training (DoPT) informed Parliament recently that there is no proposal to reintroduce the old pension scheme for Central government civil employees under consideration of the Government of India.
The Government had maintained that restoration of the old system would cause an unnecessary financial burden on the government.
The Finance Ministry had earlier ruled out proposals by a federation of Central and State governments employees saying that the “changes will be financially untenable.”

India’s pension Assets Under Management (AUM) have been growing robustly, clocking a compounded annual growth rate of an average of 30 per cent in recent years.
As of the end of April 2022, overall Pension AUM stood at ₹ 7.39 lakh crore, up 25 per cent over ₹ 5.90 lakh crore as of April 2021.
The number of NPS and Atal Pension Yojana subscribers recorded 22 per cent year-on-year growth as of April 2022 to 5.23 crore from 4.27 crore in April 2021.

The latest PAC reconstitution comes when the Indian economy is faced with several macroeconomic headwinds, such as global geopolitical tensions caused by the Russia-Ukraine conflict and runaway inflation in both developed and developing markets.
Central banks worldwide are now resorting to monetary tightening to tame inflation.The reconstitution of PAC will surely help in regulatingand framing regulations for the pension sector.

Mains Question:

Q. Briefly discuss the role of recently reconstituted Pension Advisory Committee (PAC). (150 words).