The International Financial Services Centres Authority (Pension Fund) Regulations, 2026 establish a detailed and comprehensive legal framework governing the registration, operation, and supervision of pension funds within IFSCs. The regulations mandate compulsory registration, strict eligibility criteria, and adherence to “fit and proper” standards to ensure only credible entities operate pension funds. They introduce robust governance mechanisms, including trustee oversight, disclosure obligations, and grievance redressal systems to safeguard subscriber interests. The framework emphasizes prudent investment practices, diversification norms, and defined exposure limits, along with enterprise-wide risk management, stress testing, and a three-lines-of-defence model. It also provides flexibility through varied investment options, contribution structures, withdrawal mechanisms, portability, and healthcare sub-accounts. Continuous compliance, audit requirements, and regulatory oversight are central to the regime. Overall, the regulations aim to create a transparent, secure, and globally competitive pension ecosystem focused on long-term financial stability and investor protection.
INTERNATIONAL FINANCIAL SERVICES CENTRES AUTHORITY
NOTIFICATION
Gandhinagar, the 30th March, 2026
INTERNATIONAL FINANCIAL SERVICES CENTRES AUTHORITY (PENSION FUND) REGULATIONS, 2026
F. No. IFSCA/GN/2026/007.—In exercise of the powers conferred by subsection (1) of Section 28 read with sub-section (1) of Section 12 and sub-section (1) of Section 13 of the International Financial Services Centres Authority Act, 2019; clause (b) of sub-section (1) read with sub-section (2) of section 12 and Section 50A of the Pension Fund Regulatory and Development Authority Act, 2013, the International Financial Services Centres Authority hereby makes the following regulations, namely: –
CHAPTER I
PRELIMINARY
1. Short title and commencement
1. These regulations may be called the International Financial Services Centres Authority (Pension Fund) Regulations, 2026.
2. These regulations shall come into force on and from the date of their publication in the Official Gazette.
2. Objectives
These regulations provide the regulatory framework for registration, regulation and supervision of the Pension Funds in the International Financial Services Centre in India, with the objectives of establishing a robust framework for long-term retirement savings, promoting a secure and transparent environment for subscribers, protecting their interests and maintaining the integrity of the pension ecosystem in IFSC.
3. Definitions
(1) In these regulations, unless the context otherwise requires, the terms defined herein shall bear the meanings as assigned to them below, and their cognate expressions shall be construed accordingly, –
a. “Act” means the International Financial Services Centres Authority Act, 2019 (50 of 2019);
b. “Authority” means the International Financial Services Centres Authority established under the sub-section (1) of section 4 of the Act;
c. “Board” refers to the Board of Directors of a Pension Fund;
d. “Contribution” means the amount deposited by or on behalf of a Subscriber into his/her Pension Account;
a. “Credit Rating Agency” means a person who is engaged in the business of rating of Securities, Financial Products, issuers or sovereigns, and is regulated by the Authority or other relevant financial sector regulator, in India or any foreign jurisdiction, as a credit rating agency;
b. “Custodian” means a person who is engaged in the business of providing the services of safekeeping the Financial Products, and is regulated by the Authority or other relevant financial sector regulator, in India or any foreign jurisdiction, as a custodian;
c. “Key Managerial Personnel” refers to the Chief Executive Officer, Chief Investment Officer, Chief Financial Officer, Compliance Officer, and such other officer who may be appointed/designated as Key Managerial Personnel by the Pension Fund;
d. “Net Worth” means the aggregate value of the paid-up share capital and all reserves created out of the profits, securities premium account and debit or credit balance of profit and loss account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation;
e. “Pension Account” means an account opened by a Subscriber with a Pension Fund, which, inter-alia reflects the Subscriber’s contributions, investment returns and withdrawals;
f. “Pension Fund” means an entity which has been granted a certificate of registration under these regulations by the Authority as a pension fund for receiving contributions, accumulating them and making payments to the Subscriber;
g. “Scheme” means a scheme of Pension Fund approved by the Authority; Explanation.- Scheme shall be voluntary in nature and consisting of a specific investment option or product offered by a Pension Fund having distinct investment objectives, strategies, and risk profiles.
h. “Scheme Information Document” means the document containing all material information including investment objectives, asset allocation strategy and risk profile about a specific Scheme offered by a Pension Fund;
i. “Single Window IT System (SWIT)” refers to an online platform designed by the Authority, inter-alia to facilitate processing of the application submitted for obtaining certificate of registration under these regulations;
j. “Subscriber” means any individual who is above the age of 18 years, and has voluntarily joined the Scheme and holds a Pension Account;
k. “subsidiary instruction” shall have the same meaning as assigned to it under clause (e) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Procedure for making regulations and subsidiary instructions) Regulations, 2025.
l. “Systematic Withdrawal Plan” means a facility that allows a Subscriber to withdraw a predetermined amount at regular intervals from his accumulated corpus managed by a Pension Fund;
m. “Trustee” means a person appointed by the Pension Fund to hold the assets of the
Scheme for the benefit of the Subscribers;
n. “Unit” means a unit of the Scheme representing the fractional interest proportionate to Subscriber’s share in the corpus of the Scheme.
(2) Words and expressions used and not defined in these regulations but defined in the Act or Acts mentioned in the First Schedule to the Act, or the Companies Act, 2013, or any rules or regulations made thereunder shall have the same meanings respectively assigned to them in those Acts, rules or regulations or any statutory modification or reenactment thereto, as the case may be.
CHAPTER II
REGISTRATION AND ELIGIBILITY OF PENSION FUND
4. Registration
1. No person shall act as a Pension Fund under these regulations unless it has obtained a certificate of registration from the Authority as a Pension Fund.
2. An entity desirous of obtaining a certificate of registration from the Authority as a Pension Fund shall submit an application form through SWIT, accompanied by such fees and documents and in such manner as may be specified by the Authority.
3. The applicant, while making application, shall provide comprehensive details regarding its corporate structure, financial standing (audited financial statement of the past 3 years), proposed business plan, organizational setup, key personnels, risk management framework, and such other information as may be sought by the Authority.
4. An application which is incomplete shall not be processed.
5. Eligibility for Registration
1. The applicant shall be an entity incorporated as a company in the International Financial Services Centre, or a branch of a company incorporated outside the International Financial Services Centre:
Provided that the branch structure is permitted only for a Pension Fund which is already registered or regulated by a financial sector regulator in India or a foreign jurisdiction for undertaking similar activities.
2. The Board of the applicant shall consist of at least four directors, of whom at least one-half shall be independent directors.
3. The applicant and its promoters shall be from a jurisdiction which has not been identified in the public statement of Financial Action Task Force (FATF) as “High-Risk Jurisdictions subject to call for action”.
4. The applicant or its parent or associate shall have experience in managing a pension fund, retail fund, insurance business, or commercial bank for a minimum period of ten (10) years.
Explanation.- For the purposes of this sub-regulation, “associate” shall, in relation to a person, means another person who exercises control over at least fifty per cent of the total voting power of the first person.
5. The applicant shall maintain a minimum net worth of USD 1 million at all times:
Provided that where the applicant is a parent entity, the minimum net worth shall be maintained at the parent level.
6. Appointment of Key Managerial Personnel(s)
1. The applicant shall appoint a minimum of two Key Managerial Personnels who shall be responsible for the activities of the Pension Fund, including but not limited to, fund management, risk management, etc.
2. The Pension Fund shall additionally appoint a Compliance Officer who shall be a Key Managerial Personnel for overall compliance of these regulations and other applicable laws and he shall report directly to the Board.
3. The employees appointed in accordance with sub-regulation (1) and (2) shall have:
a. a post-graduate degree or post graduate diploma (minimum one year in duration) in finance, law, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science from a university or an institution recognised by the Central Government or any State Government or a recognised foreign university or institution or association; or professional qualification such as Chartered Financial Analyst or a Financial Risk Manager from Global Association of Risk Professionals, or equivalent; and
b. minimum three (3) years of work experience in pension sector, fund management, fund operations, investment banking, or asset management, involving direct responsibility for managing financial assets or overseeing critical fund operations.
Provided that a bachelor’s degree in finance, law, accountancy, business management, commerce, or economics shall also suffice for a person with more than ten (10) years of work experience in pension sector, fund management, fund operations, investment banking or asset management.
7. Fit and proper requirements
1. A Pension Fund shall ensure that all its director(s), Key Managerial Personnel(s) and controlling shareholders are ‘fit and proper’ persons at all times, as per the criteria specified in the First Schedule.
2. Any person who has been declared not to be a ‘fit and proper’ person by an order of a regulatory authority shall not be eligible to seek registration, or be a director, Key Managerial Personnel, or controlling shareholder, as the case may be, until such person satisfies the ‘fit and proper’ criteria of the said regulatory authority.
8. Furnishing of information
1. The Authority may require the applicant to furnish any additional information or clarification for considering the application.
2. While considering an application, the Authority may also require the applicant to appear before it for personal representation or clarification.
3. The Authority may also undertake inspection of the applicant’s office prior to the grant of certificate of registration.
9. Grant of registration
1. The Authority, upon being satisfied that the applicant fulfils the eligibility criteria and requirements specified in these regulations, may grant a certificate of registration as a Pension Fund, subject to the payment of the applicable fee.
2. The grant of registration may be subject to such terms and conditions as the Authority deems fit, including, but not limited to, compliance with specific operational or financial requirements.
3. If the Authority, upon the examination of the application, is of the opinion that the registration cannot be granted, it shall communicate the deficiencies to the applicant, giving it thirty (30) days’ time to rectify them.
4. If the Applicant fails to rectify such deficiencies to the satisfaction of the Authority within the specified time, the Authority may dispose of the application and shall communicate the same to the Applicant, with reasons thereof.
5. The certificate of registration granted to a Pension Fund shall be valid unless it is suspended or cancelled by the Authority or voluntarily surrendered by the Pension Fund:
Provided that the voluntary surrender of certificate of registration shall be effective only after its acceptance by the Authority.
10. Ongoing compliance
A Pension Fund shall, at all times:
a. maintain a fully functional office within the International Financial Service Centre, which is adequate for its current and projected operations, including investment management, risk management, compliance, and administrative functions, and such office shall be equipped with necessary infrastructure, including but not limited to, a secure information technology system, communication facilities and data storage capabilities;
Explanation – the information technology system deployed by a Pension Fund covering all aspects of its operations, including investment analysis, trading, risk monitoring, valuation, record-keeping, and cyber security;
b. develop and implement comprehensive internal policies and procedures covering all aspects of its operations, including investment decision-making, risk management, compliance, grievance redressal, which policies and procedures shall be regularly reviewed and updated;
c. comply with the International Financial Services Centre Authority (AML/CFT/KYC) Guidelines, 2022, as amended from time to time;
d. establish a clear organizational structure with well-defined roles, responsibilities, and reporting lines for ensuring adequate segregation of duties; and
e. ensure continual compliance with all provisions of the Act, these regulations, and relevant subsidiary instruction as issued by the Authority from time to time, as well as other applicable laws.
CHAPTER III
SCHEME FEATURES
11. Contribution structure
1. A Pension Fund shall provide Subscribers with the flexibility to determine the frequency and amount of their contributions.
2. A Pension Fund may fix a minimum contribution amount, with the prior approval of the Authority.
12. Investment options and Scheme types
(1) Pension Fund may offer a range of investment options, including:
a. Active choice: Subscribers may actively choose their asset allocation across various asset classes within the specified limit; and
b. Auto choice (life cycle fund): A default option where asset allocation changes automatically based on the Subscriber’s age, gradually shifting from aggressive to conservative, as they approach retirement.
(2) Each Scheme shall have a clearly defined investment objective, strategy and risk profile, which shall be detailed in its Scheme Information Document.
13. Scheme filing and approval process
1. Each Scheme offered by a Pension Fund shall be constituted as a trust.
2. A Pension Fund shall seek prior approval of the Authority for each new Scheme, or any material modification proposed to be made to an existing Scheme, as the case may be, by filing requisite details with the Authority.
3. The filing referred to in sub-regulation (2) shall, inter alia, include the Scheme Information Document and such other information as may be required by the Authority.
4. A Pension Fund shall appoint a Trustee prior to filing the Scheme Information Document with the Authority and shall ensure that the Trustee meets with the ‘fit and proper’ requirements as specified in the First Schedule.
5. The scheme, as approved by the Authority, shall be launched within a period of twelve (12) months from the date of communication of such approval.
14. Withdrawal and exit options
(1) The withdrawal and exit options available to a Subscriber under a Scheme shall be as under:
(a) Provision for partial withdrawal (Pre-retirement): Limited partial withdrawals may be permitted for higher education, marriage, critical illness, housing, or any other purposes as maybe specified by the Authority, after completion of a minimum lock-in period of five years:
Provided that the amount of partial withdrawal shall not exceed seventy-five percent of Subscriber’s contribution, or such lower limit as may be disclosed in the Scheme Information Document:
Provided further that in case of withdrawal on account of critical illness, such partial withdrawal may be permitted without any minimum lock-in period.
(b) At retirement/superannuation/vesting period: Upon contributing for a minimum of ten years or upon attaining the age of superannuation, that is sixty years, whichever is earlier, a Subscriber intending to exit the scheme shall opt for a Systematic Withdrawal Plan:
Provided that in case of attainment of age of superannuation, the Subscriber may defer the withdrawal of the accumulated corpus, with or without further contributions, till he attains the age of seventy-five years.
(2) The withdrawal of corpus under clause (b) of sub-regulation (1) shall be subject to a minimum of twenty per cent. of the total accumulated corpus through a Systematic Withdrawal Plan and balance be payable lump sum to the Subscriber:
Provided that where a total accumulated corpus of a Subscriber is below a threshold specified by the Authority, the entire amount may be withdrawn as a lump sum upon retirement/superannuation.
(3) If a Subscriber exits from the Scheme before superannuation or vesting period, a minimum of twenty-five per cent. of the total corpus shall be utilised by the Subscriber for the Systematic Withdrawal Plan and the remaining of the corpus maybe withdrawn as lumpsum, subject to the threshold referred to in sub-regulation (2).
(4) In the event of the Subscriber’s death, the entire accumulated corpus shall be paid as a lump sum to the nominee(s), or, in his absence, to the legal heir(s).
15. Portability
1. A Subscriber shall have the right to change the Pension Fund up to a maximum of two (2) times per Financial Year.
2. The Authority may specify the mechanism for interoperability with other pension systems, subject to bilateral agreements and applicable regulatory approvals.
16. Nomination
A Subscriber shall have the right to nominate one or more persons, or change such nomination(s), who shall receive the accumulated corpus in the event of his death.
17. Healthcare benefit option
1. A Pension Fund may also offer a healthcare benefit option that allows Subscriber to allocate a portion of his pension contribution towards a dedicated healthcare savings account, information about which shall be included in Scheme Information Document.
2. The healthcare benefit option offered in a Scheme by the Pension Fund shall comply with the requirements specified in the Second Schedule.
CHAPTER IV
INVESTMENT MANAGEMENT AND ASSET ALLOCATION
18. General principles of investment
The general principles of investment to be adhered to by a Pension Fund shall, inter-alia, include the following:
a. Long-term investment horizon: The investment strategy shall be aligned with the long-term nature of pension liabilities.
b. Diversification: Investments shall be diversified across asset classes, sectors, and geographies, so as to reduce risk.
c. Liquidity: Sufficient liquidity shall be maintained to meet regular withdrawals and payments.
d. Risk management: A robust risk management framework shall be established to underpin all investment decisions.
e. Safety and prudence: The primary goal of investment shall be the long-term safety of the Scheme .
f. Stewardship: A Pension Fund shall act as a responsible steward of the assets of the Subscriber.
19. Permissible investments and limits
(1) A Pension Fund shall invest in any of the following asset classes: (a) listed public and private equities;
a. Fixed income instruments, such as government bonds, corporate bonds, private debt;
b. Alternative Investment Funds;
c. Frequently traded commodities;
d. Cash and short-term instruments for liquidity management; or
e. Such other financial products or instruments, as may be specified by the Authority.
(2) The specific investment limits for each class and sub-class of assets shall be in accordance with the Part-A of Third Schedule titled “Permissible investments and limits”.
(3) The specific investment limits for each class and sub-class of assets for a Scheme shall be determined by the Pension Fund in accordance with sub-regulation (2) and the same shall also be detailed in the respective Scheme Information Document.
20. Geographic diversification
A Pension Fund shall adhere to the following exposure limits for investments in India and global markets:
(a) Exposure in India: Investment in assets, across all permissible asset classes, in India may be up to hundred per cent. (100%) of the Scheme’s Assets under Management (AUM).
(b) Global market exposure (outside India): Investment in assets, across all permissible asset classes, in any one country shall not exceed twenty per cent. (20%) of the Scheme’s Assets under Management (AUM), except in case of United States of America where the maximum limit shall be fifty per cent. (50%):
Explanation.- For the purpose of this regulation, the exposure limit shall include both direct and indirect investments.
21. Concentration limits
Pension Fund shall adhere to concentration limits pertaining to single issuer and counterparty, as specified in the Part-B of the Third Schedule.
CHAPTER V
RISK MANAGEMENT
22. Enterprise-wide risk management
1. Every Pension Fund shall establish and maintain a comprehensive enterprise-wide risk management framework, approved by its Board, to identify, measure, monitor, and mitigate all material risks arising from and associated with the management of the Scheme.
2. The framework referred to in sub-regulation (1) shall be integrated into all aspects of the Pension Fund’s operations.
23. Key risk categories
1. The risk management framework established by a Pension Fund shall, inter alia, cover key risk categories as specified in the Fourth Schedule, and the detailed methodologies for managing such risks shall be outlined in the Pension Fund’s internal risk management policies in accordance with the requirements stipulated therein.
2. A Pension Fund shall implement a currency risk management policy, which shall, where appropriate, include hedging strategies.
24. Risk appetite and limits
1. The Board shall formulate and periodically review a comprehensive well-documented risk appetite statement specifying the overall level of risk a Pension Fund is willing to assume in the management of Scheme.
2. The risk appetite statement shall be appropriately translated and operationalised into specific, measurable and actionable quantitative and qualitative risk limits for the whole portfolio as well as its individual components.
25. Risk governance and oversight
(1) A Pension Fund shall implement a robust risk governance structure including a dedicated Risk Committee at the Board level, with clearly defined roles and clear lines of accountability.
(2) For the purpose of effective risk management, a Pension Fund shall adopt and implement the three lines of defence model.
Explanation. – For the purpose of this regulation, the ‘three lines of defence’ shall comprise of the following:
a. First line of defense (risk ownership): The investment management and the operations functions shall constitute the first line of defense which shall be primarily responsible for the day-to-day identification, assessment, ownership and control of all risks inherent in their activities, ensuring strict adherence to the Scheme’s investment mandates and prudential norms.
b. Second line of defense (risk control): The compliance, legal and risk management functions shall constitute the second line of defense which shall be responsible for defining the overall risk appetite, establishing internal control policies, independently monitoring adherence to regulatory requirements and risk limits, and reporting any deficiencies to Board and the Trustee.
c. Third line of defense (independent assurance): The internal audit function, which must directly report to the Board, shall constitute the third line of defense providing objective and independent assurance to the Trustee and the Authority on the effectiveness of the governance, risk management processes and internal controls implemented by the first and second lines of defense.
26. Stress testing and contingency planning
1. A Pension Fund shall conduct comprehensive stress tests and scenario analyses at regular intervals, to evaluate the resilience of the portfolio under extreme conditions.
2. A Pension Fund shall formulate, implement and maintain robust business continuity plans (BCP) and disaster recovery plans (DRP), which shall be regularly tested to ensure uninterrupted operations.
CHAPTER VI
GENERAL OBLIGATIONS AND RESPONSIBILITIES
27. Record-keeping and administration
1. A Pension Fund shall maintain a comprehensive, secure and electronic record-keeping system for all Subscriber’s data and transactions, and ensure the integrity, confidentiality and availability of such data at all times, is in accordance with the applicable laws.
2. Each Subscriber shall be assigned a unique Pension Account number by the Pension Fund.
3. A Pension Fund shall provide Subscriber with online access to his Pension Account details including transaction history, current valuation and investment allocation.
28. Reporting and disclosures
(1) A Pension Fund shall submit report about its operations, financial performance, investment portfolios, compliance status, and any other information, in such form and manner and within such timelines (including monthly, quarterly, and annually) as may be specified by the Authority.
(2) A Pension Fund shall, while onboarding a Subscriber, disclose the following :
a. Scheme Information Document;
b. Fees and charges;
c. Grievance redressal procedures;
d. Terms and conditions for contributions, withdrawals, and exit;
e. Performance reports, on a yearly basis; and
f. Annual consolidated statements detailing all transactions, investment performance, and fees charged.
(3) Any subsequent changes in the details furnished under clauses (a) to (d) of sub-regulation (2) shall be immediately disclosed to the Subscribers.
29. Grievance redressal mechanism
A Pension Fund shall take adequate steps for redressal of grievances of the Subscriber in accordance with the circular titled “Complaint Handling and Grievance Redressal by Regulated Entities in the IFSC” dated December 02, 2024, issued by the Authority.
30. Auditing requirements
1. A Pension Fund shall undergo an annual financial audit conducted by an independent auditor in accordance with the applicable laws, and the report of such audit shall be submitted to the Authority within thirty (30) days from its receipt.
2. The Authority may also conduct special audits or appoint auditors to undertake concurrent audits, as deemed necessary.
31. Custody of assets
1. A Pension Fund shall ensure that all assets of the Scheme are held in the safe custody of a Custodian.
2. The Custodian shall be independent of the Pension Fund and shall be responsible for the safekeeping and settlement of Scheme assets, and reporting of holdings, in accordance with applicable law and regulatory requirements.
32. Creation of the trust
1. The trust under sub-regulation (1) of regulation 13 shall be settled under the applicable laws in force in India.
2. The trust deed shall also include roles and responsibilities of the Trustee in accordance with the requirements specified under these regulations.
33. Eligibility for the appointment of Trustee
The entity proposed to be appointed as Trustee shall meet the eligibility conditions as follows:
a. it shall be independent of the Pension Fund ;
b. it shall be authorised/registered with the Authority or with any other financial sector regulator to act as a trustee; and
c. it shall have adequate infrastructure, manpower and other related wherewithal to the satisfaction of the Authority, to carry out its functions and obligations.
34. Roles and responsibilities of the Trustee
1. A Trustee, all its directors, officers and members of its governing body shall, at all times, act in a fiduciary capacity for the benefit of the Subscribers, and shall manage and administer the affairs of the Scheme solely in the interest of the Subscribers with the objective of protecting and enhancing their superannuation benefits.
2. A Trustee shall exercise its powers and carry out its duties with care, diligence, skill, and prudence that a reasonable and prudent person would exercise in the conduct of a similar enterprise, and shall comply with all provisions of these regulations, the trust deed and other applicable laws.
3. A Trustee shall ensure that in the event of a potential or actual conflict of interest, the interests of the Subscribers shall take precedence over all other interests, including those of the Trustee, Pension Fund or any related party.
4. A Trustee shall be responsible for ensuring that the Scheme is administered in strict compliance with the Scheme Information Document, these regulations, subsidiary instruction issued by the Authority from time to time, and other applicable laws.
35. Engagement of Distributor
1. A Pension Fund may engage one or more distributors for the purpose of marketing, soliciting or servicing Subscribers.
2. Notwithstanding the engagement referred to in sub-regulation (1), a Pension Fund shall remain fully and solely responsible for the conduct, compliance and activities of any distributor engaged, and shall ensure that such distributor adheres to these regulations and any other directions issued by the Authority.
36. Subscriber education and awareness
1. A Pension Fund shall be responsible for promoting financial literacy among potential Subscribers and providing timely, accurate and comprehensive information regarding the operation of the scheme, the risks associated with various investment options, fee structures and the subscriber’s rights and responsibilities.
2. A Pension Fund shall ensure that all key educational materials, performance disclosures and details pertaining to the Scheme are made available to every Subscriber in a readily accessible, clear and easy-to-understand format.
37. Change in control
A Pension Fund shall seek prior approval of the Authority in case of any direct or indirect change in its control:
Provided that where a Pension Fund operating in the form of a branch is required to take prior approval from its sectoral regulator in its principal place of operation, it shall only inform such change to the Authority, within fifteen (15) days thereof.
38. Payment of fees
A Pension Fund shall pay annual fees, Scheme Information Document filing fee, and any other fees as may be specified by the Authority from time to time.
CHAPTER VII
FINANCIAL ASPECTS
39. Fees and charges levied by a Pension Fund
1. A Pension Fund shall take prior approval of the Authority to levy fees and charges on the Subscribers.
2. The charges mentioned under sub-regulation (1) may include account opening charges, annual maintenance charges, investment management fees (as a percentage of Assets under Management), and transaction charges.
3. A Pension Fund shall disclose complete details of all fees and charges proposed to be levied on the Subscribers, in the Scheme Information Document and other relevant documents.
40. Valuation and Net Asset Value calculation
1. Assets and liabilities of the Scheme shall be valued on daily basis, at market prices, as per the methodologies fully disclosed and documented by the Pension Fund.
2. The Net Asset Value (NAV) per unit for each Scheme shall be calculated and declared daily, based on the total value of assets less liabilities, divided by the number of outstanding units.
3. For the purpose of carrying out valuation functions, a Pension Fund may appoint a valuer registered with the Insolvency and Bankruptcy Board of India or the Authority, or such other person as may be specified by the Authority.
CHAPTER VIII
COMPLIANCE AND ENFORCEMENT
41. Inspection and investigation
(1) The Authority may, suo motu or upon receipt of information or complaint, undertake the inspection of the books, accounts, records, documents, infrastructure, procedures and systems of a Pension Fund, Custodian, Trustee or any other person associated with the pension ecosystem in the International Financial Services Centres, for any of the following purpose:
i. ensuring compliance with these regulations;
ii. protecting the interests of the Subscribers; or
iii. any other purpose as deemed fit by the Authority. (2) The Authority shall also have the power to conduct investigation.
42. Action in case of default
1. The Authority may initiate such action as it deems fit, in case a Pension Fund, Custodian or any other person associated with the pension related activities in International Financial Services Centre contravenes any of the provisions of these regulations, subsidiary instruction issued thereunder.
2. No action referred to under sub-regulation (1) shall be taken without giving a Pension Fund, Custodian, or any other person associated with the pension related activities in International Financial Services Centre, as the case may be, a reasonable opportunity of being heard by way of written submissions.
CHAPTER IX
MISCELLANEOUS PROVISIONS
43. Power to relax strict enforcement of the regulations
1. The Authority, for reasons to be recorded in writing, may in the interest of development of pension ecosystem in International Financial Services Centre, relax the strict enforcement of any provision of these regulations.
2. For seeking relaxation under sub-regulation (1), an application giving details and the grounds on which such relaxation is being sought, shall be filed with the Authority along with such non-refundable fee as may be specified by the Authority.
3. The application made under sub-regulation (2), complete in all respects, shall be processed within sixty (60) days from the date of its receipt, or receipt of the responses to the clarifications sought by the Authority, if any.
4. The Authority shall dispose of the application received under sub-regulation (2), by recording the reasons in writing for acceptance or refusal of relaxations sought by the applicant.
44. Power to call for information
The Authority may call for any information, document or record from a Pension Fund, Trustee, Custodian or any other person associated with the pension ecosystem in the International Financial Services Centre.
45. Power to specify procedures
The Authority may, from time to time, specify norms, procedures, processes or additional requirements, by way of subsidiary instruction, for the purposes of implementation of these regulations and matters incidental thereto.
46. Power to remove difficulties and issue clarification
In order to remove any difficulties in the interpretation or application of the provisions of these regulations, the Authority may issue directions, clarifications, guidance notes or subsidiary instructions.
47. Cyber security and cyber resilience
A Pension Fund shall have robust cyber security and cyber resilience framework in accordance with the requirements as may be specified by the Authority from time to time.
48. Delegation of powers
The powers exercisable by the Authority under these regulations shall also be exercisable by any officer of the Authority to whom such powers are delegated by the Authority.
49. Overriding effect
On and from the commencement of these regulations, any regulations notified by the Pension Fund Regulatory and Development Authority shall not apply to a pension scheme approved by the Authority to the extent they are inconsistent with these regulations.
FIRST SCHEDULE
FIT AND PROPER REQUIREMENTS
[see regulations 7(1) and 13(4)]
A person shall be deemed to be a fit and proper person if:-
(a) such person has a record of fairness and integrity, including but not limited to-
i. financial integrity;
ii. good reputation and character; and
iii. honesty.
(b) such person has not incurred any of the following disqualifications –
i. the person has been convicted by a court for any offence involving moral turpitude or any economic offence or any offence against securities laws;
ii. charge sheet has been filed against such person by any Indian enforcement agency in matters concerning economic offences and is pending;
iii. charges have been framed by a court of law or an equivalent institution in matters concerning economic offences;
iv. a recovery proceeding has been initiated against the person by a financial regulatory authority and is pending;
v. an order for has been passed against the person for malfeasance;
vi. the person has been declared insolvent and not discharged;
vii. an order restraining, prohibiting or debarring the person from accessing or dealing in financial product(s) or financial service(s), has been passed by any regulatory authority, in any matter concerning securities laws or financial services market and such order is in force;
viii. any other order against the person, which has a material bearing on the financial services market, has been passed by the Authority or any other regulatory authority, and a period of three years from the date of the order has not elapsed:
Explanation. – For the above provision, the decision to determine materiality shall be that of the Authority;
ix. the person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force;
x. the person is financially not sound or has been categorized as a wilful defaulter;
xi. the person has been declared a fugitive economic offender; or
xii. any other disqualification as may be specified by the Authority.
SECOND SCHEDULE
HEALTHCARE BENEFIT OPTION
[see regulation 17(2)]
Compliance requirements for offering healthcare benefit option –
1. Sub-account: The Pension Fund must maintain a separate “Healthcare Sub-Account” for the Subscribers who opt for this benefit, and contributions to this sub-account shall be kept distinct from the main pension contributions.
2. Regulatory Approval: A Pension Fund intending to offer this option shall obtain prior approval from the International Financial Services Centre Authority and may demonstrate a tie-up with a licensed health insurance provider or a healthcare benefit administrator.
3. Voluntary Contribution: The healthcare benefit option shall be offered on a voluntary basis, and Subscribers may allocate a portion of their regular contributions, or make additional contributions, to this sub-account.
4. Contribution Limits: A maximum of ten percent of the Subscriber’s total contributions may be contributed by the Subscriber to his/her healthcare sub-account.
5. Investment Mandate: Funds in the sub-account may be invested in a low-risk, highly liquid portfolio, including government bonds and money market instruments, to ensure that they are readily available for healthcare needs.
6. Authorized Use: Funds from the sub-account shall only be used for hospital expenses as provided in the Scheme Information Document issued by the Pension Fund.
7. Pre-Retirement Access: Funds from the sub-account can be accessed at any time for medical emergencies or planned healthcare expenses.
8. Retirement and Rollover: Upon retirement, any unused balance may be used to purchase health insurance or be rolled over into the main pension corpus.
THIRD SCHEDULE
PART – A
PERMISSIBLE INVESTMENTS AND LIMITS
[see regulation 19(2)]
All exposures shall be calculated based on the total value of the portfolio.
I. Fixed income instruments
1. Government bonds: 100% of the portfolio may be allocated in sovereign debt, such as Government of India bonds, and highly rated public sector bonds.
2. Corporate bonds: A maximum of 40% may be allocated to corporate bonds, of which at least 70% shall be invested in securities that are rated BBB and above, and in case any such security is downgraded below the permissible rating, the investment shall be restored to investment grade within a period of 12 months to comply with the investment limits.
3. High-yield/Non-investment grade: A maximum of 5% of the portfolio may be invested in high-yield bonds, after conducting a thorough credit analysis is conducted on the same.
A rating from only one credit rating agency, either domestic or international, shall be sufficient for investment purposes of the Scheme.
II. Equities
1. Total equity exposure: The total allocation to equities may be 100% of the portfolio, depending on the nature of the Scheme floated by the Pension Fund.
2. Domestic equities: A maximum of 100% may be invested in Indian equities.
3. Large-cap: A minimum of 50% of the domestic equity allocation shall be in large-cap stocks.
4. Mid- and small-Cap: A maximum of 40% of the domestic equity allocation may be in mid- and small-cap stocks, and in the event of any breach arising from reclassification or change in market capitalization, a curing period of twelve months shall be permitted to restore compliance with the specified investment limits.
5. Foreign equities: A maximum of 100% may be allocated to foreign equities, subject to appropriate diversification across different developed and emerging markets.
III. Alternative investments
The overall maximum permissible allocation of the corpus to Alternative Investments shall not exceed fifteen percent (15%) of the total portfolio value, and the investment limits for individual sub-categories within alternative investments shall be as follows:
1. Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs): A maximum of 10% may be allocated to these instruments, which offer exposure to real assets with a degree of liquidity.
2. Private Equity and Venture Capital: A maximum of 5% may be invested in these illiquid assets, and such investments shall be carefully selected and must align with the Scheme’s long-term horizon.
3. Commodities: A maximum of 5% may be allocated to frequently traded commodities, primarily through exchange-traded funds (ETFs).
PART – B
CONCENTRATION LIMITS
(see regulation 21)
I. Single issuer limit
The total exposure to the securities, including both debt and equity, issued by a single corporate entity or its related parties shall not exceed 10% of the Scheme:
Provided that this limit shall not apply to government securities.
II. Counterparty limit:
1. Sponsor Group Companies (Debt): Investment in debt securities of a sponsor group company shall be restricted to five percent (5%) of the net worth of all sponsor group companies, or five percent (5%) of the Assets under Management (AUM) of the concerned Scheme, whichever is lower.
2. Non-sponsor Group Companies (Debt): Investment in debt securities of a single non-sponsor group company shall be restricted to ten percent (10%) of the net worth of all non-sponsor group companies, or ten percent (10%) of the Assets under Management (AUM) of the concerned Scheme, whichever is lower.
3. Industry concentration: Exposure to a single industry sector shall not exceed fifteen (15%) of the total Assets under Management (AUM) across all Schemes managed by a single Pension Fund.
4. Equity exposure in a single company:
a. Maximum of five percent (5%) of the paid-up capital for sponsor group companies; and
b. Maximum of ten percent (10%) for non-sponsor group companies.
5. Term deposits: A maximum of ten percent (10%) exposure per eligible bank is permitted for term deposits.
FOURTH SCHEDULE
RISK MANAGEMENT
[see regulation 23(1)]
Effective risk management is crucial for the long-term stability and success of any Scheme, as, given the complexity and scale of its operations, it requires the identification, assessment, and mitigation of risks across various categories – from financial market risks to operational and regulatory risks – within a robust framework that enables the Pension Fund to manage these risks effectively, safeguard investor interests, and comply with regulatory standards.
1. Risk management framework
The Pension Fund must establish processes and procedures that ensure that risks are proactively identified and mitigated throughout the investment lifecycle.
1.1 Establishing a robust risk management framework
The Pension Fund shall create a formal risk management framework that is integrated into the overall governance structure of the Scheme and includes the following:
a. Risk identification: The Pension Fund must establish procedures to identify all potential risks across the Scheme’s operations, including financial risks (market, credit, liquidity), operational risks (process breakdowns, systems failures), and regulatory risks (compliance with laws and regulations).
b. Risk assessment: Once identified, each risk must be assessed in terms of its potential impact on the Scheme’s performance and operations, with the Pension Fund using both quantitative and qualitative risk assessment methods to evaluate the severity and likelihood of each risk.
c. Risk mitigation: The Pension Fund must develop strategies to mitigate or manage identified risks, including setting risk limits, diversifying the portfolio, using financial instruments like derivatives for hedging, and implementing robust internal controls to minimize operational risk.
d. Risk monitoring and reporting: Continuous monitoring of risk exposure is essential to ensure that any changes in market conditions or internal operations are promptly addressed, and in this regard, the Pension Fund must have systems in place to report risks to the senior management and the Board, which shall include periodic risk reports that provide an overview of the Scheme’s risk profile.
e. Risk governance: The risk management framework must be overseen by the Compliance Officer who shall have the responsibility for ensuring the effective implementation of risk management practices and policies, and shall report directly to senior management or the Board, to ensure that risk is integrated into the Scheme’s decision-making processes.
2. Types of risks
A well-rounded risk management framework must address a wide range of potential risks that could affect the Scheme, and below are the key types of risks that the Pension Fund must consider and mitigate:
2.1 Market risk
a) Definition: Market risk refers to the potential for losses due to fluctuations in the market value of assets, such as stocks, bonds, commodities, or currencies, and includes the following:
i. Price risk: The risk that the price of a security or asset may change in an unfavorable direction, such as the stock prices falling, or the bond prices rising;
ii. Volatility risk: The risk that market volatility may increase, causing larger-than-expected price swings;
iii. Interest rate risk: The risk that changes in interest rates may affect the value of fixed-income securities, such as bonds, in the portfolio; and
iv. Currency risk: The risk that the value of assets, liabilities, income, or returns denominated in a foreign currency may be adversely impacted from fluctuations in foreign exchange rates.
b) Mitigation: To manage market risk, the Pension Fund must employ strategies such as diversification, hedging with derivatives, and asset allocation that balances the Scheme’s exposure to different types of market risks, and may also use stop-loss orders and dynamic asset rebalancing to reduce exposure to volatile assets.
2.2 Credit risk
a) Definition: Credit risk refers to the potential for losses in case an issuer of a security, such as a corporate bond or government bond, or a counterparty to a transaction fails to meet its financial obligations, and includes the following:
i. Default risk: The risk that the issuer of a bond or debt instrument may not be able to repay the principal or interest on the debt; and
ii. Counterparty risk: The risk that a counterparty in a financial transaction, such as in derivative contracts or repurchase agreements, may default on its obligations.
b) Mitigation: The Pension Fund must mitigate credit risk by investing in high-quality, investment-grade securities, performing thorough credit assessments of issuers, and employing credit diversification across sectors and geographies, and may also consider the use of credit default swaps (CDS) or other credit-linked instruments to hedge against credit risk.
2.3 Liquidity risk
a) Definition: Liquidity risk arises when the Pension Fund is unable to buy or sell an asset in the market without significantly affecting its price, or when the Scheme cannot meet its short-term financial obligations, such as withdrawals from pension accounts, and includes the following:
i. Asset liquidity risk: The risk that assets cannot be quickly converted to cash without incurring a loss;
ii. Funding liquidity risk: The risk that the Scheme does not have sufficient cash or liquid assets to meet its obligations, such as investor redemptions or operational costs.
b) Mitigation: To mitigate liquidity risk, the Pension Fund must maintain a liquid buffer of cash or highly liquid assets that can be accessed easily to meet short-term obligations, assess the liquidity profile of assets in the portfolio and limit exposure to illiquid assets, and conduct stress tests to anticipate potential liquidity shortfalls in extreme market conditions.
2.4 Operational risk
a) Definition: Operational risk arises due to failures in internal processes, people, systems, or external events, and includes the following:
i. Human error: Mistakes made by employees or managers, such as incorrect transaction execution or data entry errors;
ii. System failure: Breakdowns in technology, such as software glitches or cybersecurity breaches; and
iii. Process failure: Flaws in internal procedures or controls, such as failure to reconcile accounts correctly or process the transactions in a timely manner.
b) Mitigation: To manage operational risk, the Pension Fund must implement strong internal controls, comprehensive training programs for employees and backup systems to minimize the impact of system failures, and conduct regular audits, implement process automation and pursue continuous improvement initiatives to help reduce the likelihood of operational failures.
2.5 Compliance risk
a) Definition: Compliance risk refers to the risk that the Pension Fund may fail to comply with laws, regulations, or contractual obligations, and includes the risks associated with the following:
i. Regulatory non-compliance: Failure to comply with regulatory requirements set by the International Financial Services Centre Authority, or any other relevant regulatory authority;
ii. Legal disputes: Potential litigation or legal action involving the Pension Fund or the Scheme; and
iii. Contractual risk: Risk of failing to fulfil contractual obligations relating to investors, custodians, or service providers.
b) Mitigation: Compliance risks must be mitigated by ensuring strict adherence to all relevant regulations, including periodic reviews of legal obligations, and the Compliance Officer shall monitor regulatory changes and ensure that the both Pension Fund and Scheme are compliant with the applicable rules and regulations.
3. Stress testing and scenario analysis
Given the unpredictability of market and economic conditions, the Pension Fund must regularly assess how the Scheme would perform under different stress scenarios, using stress testing and scenario analysis to identify vulnerabilities in the Scheme’s portfolio and operations to prepare for adverse outcomes.
3.1 Conducting Stress Testing and Scenario Analysis
a) Definitions
i. Stress testing: Stress testing involves simulating extreme market conditions, such as a market crash, sudden interest rate hikes, or adverse geopolitical events, to evaluate the impact on the Schemes portfolio, and assess whether the Scheme’s risk management framework is robust enough to withstand market shocks.
ii. Scenario analysis: Scenario analysis examines various “what-if” scenarios, such as changes in inflation rates, interest rates, or economic growth, to understand the potential impact on the Scheme’s returns and risk profile, and helps the Pension Fund understand the potential risks under different macroeconomic conditions.
b) Corrective actions based on findings
The findings of stress tests and scenario analyses must result in corrective actions, which may include the following:
a. Adjusting asset allocation: Based on the outcomes of stress tests, the Pension Fund may decide to rebalance the Scheme’s portfolio to reduce exposure to high-risk or illiquid assets;
b. Risk reduction strategies: The Pension Fund may choose to implement additional hedging strategies, adjust derivative positions, or increase the liquid cash buffer to safeguard against potential liquidity risks; and
c. Contingency plans: Stress testing may reveal the need for updating contingency plans or setting up emergency liquidity lines to ensure that the Scheme can meet investor redemption requests in times of crisis.
PRAVEEN TRIVEDI, Executive Director
[ADVT.-III/4/Exty./05/2026-27]
