Other Intermediaries: Trustee Bank, Custodian, Retirement Advisers, Annuity Providers and Aggregators

Besides the CRA, pension funds and points of presence, the NPS relies on several other entities: a bank that moves the money, a custodian that holds the securities, advisers who guide subscribers, insurers who pay annuities, and aggregators who reach the unorganised sector. The PFRDA Act brings all of them within the wide definition of intermediary, and requires each to be registered or empanelled and to follow the Authority's regulations.

1. The Definition of Intermediary

Under Section 2(1)(g), an intermediary includes a pension fund, a central recordkeeping agency, the NPS Trust, a pension fund adviser, a retirement adviser, a point of presence and any other person or entity connected with the collection, management, recordkeeping and distribution of accumulations. The definition is inclusive, so the Trustee Bank, custodians and similar entities, which perform such functions, fall within PFRDA's regulatory reach, and under Section 27(1) must not act without a certificate of registration to the extent regulated under the Act.

2. The Trustee Bank

• Definition (Section 2(1)(v)): a banking company as defined in the Banking Regulation Act, 1949, appointed as Trustee Bank.
• Role: it is the clearing point for NPS funds. It receives contributions from points of presence and nodal offices, transfers them to pension funds on the CRA's instructions, and pays money out to subscribers, annuity providers and nominees on exit or withdrawal.
• Accounts: funds are held in accounts in the name of the NPS Trust, not of the bank.
• Supervision: the Trustee Bank is appointed through a selection process and is monitored by the NPS Trust, under the PFRDA (Trustee Bank) Regulations.
• Importance: speed matters. Every day that money sits uninvested costs subscribers returns, so the Trustee Bank must reconcile and transfer funds within tight timelines.

3. The Custodian

• Role: the custodian holds the securities bought by pension funds, in electronic or physical form, settles trades, collects interest and dividends, and handles corporate actions such as bonuses and rights.
• Separation: the pension fund decides what to buy; the custodian holds what is bought. This prevents a fund manager from misappropriating securities.
• Regulation: the custodian must also be registered with SEBI as a custodian of securities, and is registered with PFRDA under its regulations on custodians.
• Reporting: the custodian reports holdings to the pension funds and the NPS Trust, allowing independent verification of each scheme's assets.

4. Retirement Advisers

• Regulation: retirement advisers are registered under the PFRDA (Retirement Adviser) Regulations, first made in 2016.
• Role: to advise individuals on retirement planning and the NPS, help them choose schemes and pension funds, and assist with enrolment and service requests.
• Eligibility: individuals and entities meeting qualification, certification and net worth requirements.
• Conduct: a duty to act in the subscriber's interest, to disclose fees and conflicts, and to avoid mis-selling. PFRDA may suspend or cancel registration for misconduct.

5. Annuity Service Providers

• Who: life insurance companies registered with IRDAI and empanelled by PFRDA to provide annuities to NPS subscribers on exit.
• Dual regulation: the annuity is an insurance product, so its design and pricing are regulated by IRDAI; PFRDA empanels the providers and sets the conditions for annuity purchase under the exit regulations.
• Choice: subscribers choose the provider and the type of annuity, and annuity quotes can be compared at the time of exit.
• Continuing issue: low annuity rates and the taxability of annuity income have been major sources of subscriber dissatisfaction, and the coordination between the two regulators remains a point of reform.

6. Aggregators and Service Providers for Social Schemes

• Aggregators: under NPS Lite, registered aggregators, such as self-help groups, microfinance institutions and cooperatives, enrolled low-income subscribers and collected small contributions.
• APY service providers: under the Atal Pension Yojana, banks and the Department of Posts act as service providers, enrolling subscribers and collecting contributions through auto-debit.
• Significance: these intermediaries extend the system beyond salaried employees to workers who would otherwise have no pension at all.

7. Points of Presence and eNPS

Points of presence, registered under Section 22, are the subscriber's main point of contact: they enrol subscribers, collect contributions and process requests. The eNPS platform, operated through the CRAs and points of presence, allows the same services online. Both are dealt with in detail alongside contributions and portability.

8. Common Obligations of Intermediaries

• Registration: to act only under a certificate of registration (Section 27), after satisfying eligibility norms (Section 26).
• Compliance: to follow the Act, rules, regulations, directions (Section 15) and the conditions of registration.
• Records and information: to maintain books of account in the form specified, and furnish information and documents to the Authority.
• Grievances: to have a system for redressing subscriber grievances.
• Charges: to charge only within the limits set by PFRDA.
• Enforcement: to submit to inspection, investigation and penalties for default (Sections 14, 16, 28).

9. Related Topics and Provisions

• Key definitions (Section 2)
• Contributions, portability and points of presence (Section 22)
• Pension funds and the NPS Trust (Section 23)
• Eligibility and registration of intermediaries (Sections 26 and 27)
• Annuities and the role of IRDAI
• The Atal Pension Yojana; NPS Lite and Swavalamban