The government has sought legal opinion on its proposed move to separate the National Pension Scheme (NPS) Trust from pension regulator Pension Fund Regulatory and Development Authority to address the issue of conflict of interest.
Government sources said that the draft cabinet note on separation of regulator’s powers has already completed inter-ministerial consultations and final note would be sent to the cabinet soon after legal opinion on the matter is secured.
The government intends to get cabinet approval on the proposal this month itself so that PFRDA Act, 2013, is amended and the Bill is introduced for clearance when Parliament reconvenes after the break in the budget session.
The role of the PFRDA includes implementation and regulation of NPS and Atal pension Yojana through various entities including the NPS Trust. This creates a situation of conflict of interest as PFRDA has to perform dual function of regulating the pension sector in the country while at the same time running pension schemes through NPS that ultimately it regulates as well.
“Keeping in view the wider interest of the subscribers and to maintain at arm’s length the relationship of the NPS Trust with PFRDA, steps will be taken to separate the NPS Trust from PFRDA with appropriate organisational structure,” a Finance Ministry note on implementation of budget proposals for FY20 said.
NPS Trust was established by the PFRDA for taking care of the assets and funds under its pension scheme that is subscribed by both government employees and those in the private sector. In fact, in order to make the scheme popular among employees in the private sector government allows an additional deduction of Rs 50,000 for all investment made in a year into NPS.