PFRDA Releases A Notice On The Transfer of Legacy Funds For Government Sector Subscribers of NPS

Employees of state governments, state autonomous bodies and central autonomous bodies shall transfer their entire accrued corpus under their PRAN account to the preferred pension fund or asset allocation in one particular upon pursuing the preference of investment schemes and pension funds. It was agreed earlier in June 2020 that State Governments, State Autonomous Authorities and Central Autonomous Authorities will be able to enact provisions on the basis of their own internal permissions and approvals without obtaining the permission of the PFRDA.

It was proposed at the time that the transfer of a large legacy fund from the current Pension Funds to government subscribers will possibly have an effect on the sector. It can be technically challenging for the PFRDA to enable government subscribers to alter, in one move, the Pension Funds or investment pattern in relation to the accrued corpus. Consequently, it has been proposed that, for the time being, an adjustment in the pension fund or investment strategy is only permitted with regard to gradual transactions.

Existing NPS guidelines

Currently, PFRDA has outlined the following in its February 15, 2021 circular:

• If the State Governments, State Autonomous Bodies, or Central Autonomous Bodies seek to access the choice of pension funds and/or the allocation of funds, make sure that their entire accrued corpus under their PRAN account shall be transferred to the approved Pension Fund(s) / Asset Allocation Fund(s) upon the application of the choice of investment schemes and pension funds by the subscribers.
• In the view of subscribers who have already pursued this alternative, their legacy fund shall automatically be transferred to the Pension Fund and to the allocation of funds selected by subscribers. For the Central Government subscribers as well, the same is now being pursued.

Note: The Gazette Notification dated 31 January 2019 released by the Ministry of Finance to the Department of Financial Services has already revised the Ministry of Finance Notification dated 22 December 2003 to ease the introduction of the National Pension System (NPS). With the effective date of issuance of this circular, the above regulations are valid.