The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a major regulatory change to strengthen the protection for National Pension System
(NPS) subscribers. Under the revised framework, pension funds will continue to remain fully accountable to subscribers even if they outsource certain operational functions to third-party entities. The new provision has been brought into force through the Pension Fund Regulatory and Development Authority (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2026, which became effective from July 13, 2026. The amendment adds Regulation 4A to the existing Exits and Withdrawals Regulations, 2015, providing greater clarity on responsibility and accountability in outsourced pension services. Under the newly introduced Regulation 4A, pension funds are permitted to appoint another entity to manage or operationalise a "specific purpose scheme" in accordance with guidelines issued by the regulator. However, the amendment makes it clear that outsourcing operational responsibilities does not transfer accountability. Pension funds will continue to bear responsibility for services provided to subscribers through such arrangements. According to the notification, the pension fund "shall be responsible to the subscriber" who has availed services under such a scheme and "be liable for any act of omission or commission" of the entity engaged by it. The revised regulations also prescribe eligibility requirements for third-party entities. These organisations must possess the necessary technological capabilities to integrate seamlessly with pension funds or other PFRDA-registered intermediaries, including the Central Recordkeeping Agency. Their systems should support functions such as information sharing, benefit payments and other subscriber-related services. In addition, both the pension fund and any outsourced entity will remain under PFRDA's regulatory oversight and must comply with all applicable laws and regulatory requirements. For NPS subscribers, the amendment provides greater confidence by ensuring that pension funds cannot avoid liability for shortcomings arising from outsourced operations. PFRDA Launches Regulatory Sandbox To Promote Innovation Alongside the amendment to the exit and withdrawal regulations, PFRDA has also notified the Pension Fund Regulatory and Development Authority (Regulatory Sandbox) Regulations, 2026, creating a framework to encourage innovation in India's pension ecosystem. According to the regulator, the initiative aims to support responsible innovation while safeguarding subscriber interests and ensuring the orderly growth of pension schemes regulated by the Authority. The Regulatory Sandbox will allow eligible entities to test new products, services, business models and technology-driven solutions in a supervised environment. Where appropriate, PFRDA may provide limited and time-bound regulatory relaxations to facilitate such testing.
