Pension Coverage and Supervision in India
Project Development Objective (PDO)
This program aims to help the Pension Fund Regulatory and Development Authority (PFRDA) undertake initiatives to expand the coverage of private pensions in India, while improving the efficiency, security, and sustainability of pensions regulated and supervised by the PFRDA.
The Pension Fund Regulatory and Development Authority (PFRDA) is the regulator and supervisor of private pension funds in India. In addition, the 2013 PFRDA Act gave the PFRDA a broad remit for “the promotion of old age income security in the country, for promoting [the] pension industry and for protecting the interest of the subscriber to pension and retirement funds.” Thus, the PFRDA will have a key role in broader efforts to expand the coverage of pensions, deepen financial inclusion, and enable the development of capital markets. The PFRDA recognizes that these efforts require a robust outcomes- and risk-based methodology with a clear monitoring and evaluation framework. An integrated strategic approach that can (a) identify the key risks to its long-run objectives, (b) recognize the best solutions, and (c) then allocate scarce resources across very different functions is needed.
The PFRDA has requested assistance with the following activities and deliverables:
1. Roadmap and detailed implementation plan for the PFRDA’s new remit
Provide a roadmap and time-bound implementation plan for the PFRDA to implement its regulatory and coverage remit. The plan will identify the regulatory perimeter for the PFRDA in the universe of pension products. It will also identify relevant legislation and regulation that need to be developed.
2. Coverage expansion strategy
Prepare a strategy to expand coverage by using multiple channels and approaches tailored to target sectors. The strategy will include demand-side initiatives such as customer protection and literacy and the use of technology to drive down the cost of delivery.
3. Development of outcomes and risk-based regulation and supervision that includes guidelines and manuals
Develop risk-based regulation and supervision for pension funds that will enable the PFRDA’s structure, systems, and skilled staff to achieve its overall strategy. As the PFRDA begins to implement processes and procedures, it will also identify key risks to its objectives, discern the best solutions, and take regulatory and supervisory action. Regulation and supervision of occupational and unorganized pension plans will create new tools, processes, and skills to effectively regulate and supervise the plans.
4. Recommendations for changes in legislation and regulation
Examine global best practices on legislation, regulation, and guidance that will guide suggestions for tackling gaps identified in the coverage and risk-based supervision element. The suggestions will be developed in consultation with the pensions industry.
The short- and medium-term expected outcomes include the following:
1. Provision to pension supervisors of the roadmap, tools, and capacity to deliver their long-run
2. Implementation of an approach to expand pensions to informal or unorganized workers
3. Enhanced regulations related to investment, governance, and payouts
4. Increased private pension coverage and sustainability