The PFRDA Act, 2013: Object, Scope and Scheme

For most of its history, India provided old age income security to a small group of people, chiefly government servants, through pensions paid out of the budget. Most working people had no pension at all. The Pension Fund Regulatory and Development Authority Act, 2013 (the PFRDA Act) gives statutory backing to a different model: a contributory, funded pension system, the National Pension System (NPS), supervised by an independent regulator. This note explains what the Act sets out to do, where it applies, and how its ten chapters are organised.

1. Enactment and Commencement

• Act number: Act No. 23 of 2013.
• Passage: passed by the Lok Sabha on 4 September 2013 and the Rajya Sabha on 6 September 2013; it received the President's assent in September 2013.
• Commencement: brought into force on 1 February 2014 by notification under Section 1(3), which allows different dates for different provisions.
• Predecessor: before the Act, the NPS was run under an executive notification of 22 December 2003, and the regulator functioned as the Interim PFRDA, set up by a Government resolution of 10 October 2003.

2. The Long Title and the Object of the Act

The long title identifies four objects:

• Promoting old age income security: the central social purpose. The Authority is not merely a market regulator; it is charged with expanding pension coverage.
• Establishing and developing pension funds: a developmental role, reflected in the word "Development" in the Authority's name.
• Regulating pension funds: a regulatory role over pension funds, the central recordkeeping agency, points of presence and other intermediaries.
• Protecting subscribers: safeguarding the savings of people who contribute to pension schemes, who usually cannot monitor fund managers themselves.

3. Short Title, Extent and Commencement (Section 1)

The Act extends to the whole of India, but its application is defined more narrowly by Section 12: it applies to the NPS and to pension schemes not regulated by any other law, and excludes provident funds, insurance contracts and certain government employees.

4. The Model the Act Regulates

The Act is built around a defined contribution model, in contrast with the defined benefit model of the Old Pension Scheme:

• Defined benefit (Old Pension Scheme): the pension is a fixed proportion of last pay, revised with dearness relief, and paid by the government out of current revenues. The employee does not contribute; the government bears the investment and longevity risk.
• Defined contribution (NPS): the employee and, where applicable, the employer contribute to an individual pension account; the money is invested by pension funds; and the eventual pension depends on the accumulated corpus, part of which must be used to buy an annuity. The subscriber bears the investment risk.
• Funded and portable: contributions are invested in markets and the account moves with the subscriber across jobs and places (Section 20).

5. The Scheme of the Act

• Chapter I, Preliminary (Sections 1 and 2): title, extent, commencement and definitions.
• Chapter II, the Authority (Sections 3 to 11): establishment, composition, members, meetings and staff.
• Chapter III, Extent and application (Section 12): schemes covered and excluded.
• Chapter IV, Transfer of assets (Section 13): succession from the Interim Authority.
• Chapter V, Duties, powers and functions (Sections 14 to 19): functions, directions, investigation, search and seizure, compliance and administrators.
• Chapter VI, National Pension System (Sections 20 to 26): the NPS, the central recordkeeping agency, points of presence, pension funds, foreign investment, offshore investment and eligibility.
• Chapter VII, Registration of intermediaries (Section 27).
• Chapter VIII, Penalties and adjudication (Sections 28 to 38): penalties, adjudication, attachment, offences, immunity, appeals to the Securities Appellate Tribunal and the Supreme Court.
• Chapter IX, Finance, accounts and audit (Sections 39 to 42): grants and the Authority's funds.
• Chapter X, Miscellaneous (Sections 43 to 55): Central Government powers, the Pension Advisory Committee, rules and regulations, and savings.

6. Place of the Act in the Pension Landscape

• What it covers: the NPS for government employees who joined after the cut-off date, State employees whose governments have adopted it, corporate employees, and individual citizens; and other unregulated pension schemes.
• What it does not cover: the Employees' Provident Fund system under the EPF Act, 1952 (administered by the EPFO), other statutory provident funds, and insurance and annuity contracts regulated by IRDAI, though annuities bought at exit from NPS are supplied by insurers.
• Schemes administered by PFRDA: besides the NPS, PFRDA administers the Atal Pension Yojana (2015), and the Unified Pension Scheme (from 1 April 2025) operates as an option under the NPS for Central Government employees.

7. Related Topics and Provisions

• Pension reform in India
• Key definitions
• Extent and application
• The National Pension System