National Pension System set for a major digital revamp, here's what's expected

The National Pension System (NPS) is set for a major digital revamp which will “protect subscriber interest” through risk-based monitoring of the invested funds and automate the compliance process the NPS Trust employs.

News18 has accessed a document that details the exercise which will be completed in 2022. The NPS covers entrants to the central government since 2004, employees of majority of state governments, central autonomous bodies, some state autonomous bodies and stands extended to all other citizens of India on voluntary basis as well as corporates. NPS has nearly 1.5 crore subscribers with total contributions to the tune of Rs 4,41,875 crore.

As per the system so far at NPS Trust, it receives periodic reports on a monthly, quarterly, half-yearly and yearly basis from different intermediaries which are submitted through e-mail and even physical mode and are checked for compliance and validation. The exceptions are reported to the Pension Fund Regulatory and Development Authority (PFRDA), which regulates the pension sector.

“The present system poses challenges like lack of automated and robust data collation process, lack of automated data assimilation and consolidation process, lack of system supported follow up, low data accuracy, inability to identify and assess risks, and clustered and semi-automated grievance management system,” the document mentions. The new project will be a big one. What will change in NPS 2.0? The NPS Trust will implement a new digital solution to “effectively and efficiently measure and monitor compliance across pension fund management ecosystem by providing them with an electronic platform to submit the compliance reports,” the document mentions. This will enable NPS Trust to perform compliance assessments with a detailed scope and frequency, “effectively and efficiently monitor the intermediaries" and keep PFRDA informed. More importantly, such automation of the compliance process will “build analytics and risk-based monitoring system and establish a strong risk data governance and issue reporting framework,” the document adds. The NPS Trust will use Analytics and Business Intelligence. “The solution will speed up response time through process automation, protect subscriber’s interest and integrate seamlessly with compliance-focused supervision and risk-focused supervision in future,” the document mentions. An agency will be hired by the NPS Trust to execute the digital platform and the NPS 2.0 project will go live within nine months from the project being awarded later this year. The intermediaries referred above include the various Pension Funds, custodians and Trustee Banks. Why is monitoring pension fund in important? Securities are purchased by Pension Funds in the name of the NPS Trust and these Pension Funds manage the pension contributions of all subscribers and are responsible for investment of NPS contributions as per the investment guidelines of PFRDA. “Pension Funds are required to optimise the return on the investments of the funds of the subscribers deployed by it and exercise all due diligence in carrying out its duties and in protecting the rights and interests of the subscribers,” the document says.