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Background

The Government of India has introduced a New Pension System (NPS) which is applicable on a mandatory basis to all employees (excluding armed forces) who join central government service on or after 01 January 2004. As on date, as per available information, the NPS coverage has extended to over 75,000 new employees of the central (civil) ministries, non-civil departments including Railways, Defence (Civil), Telecom and Posts, as well as autonomous bodies, grant-in-aid institutions and Union Territories. The Controller General of Accounts (CGA), in collaboration with the Central Pension Accounting Office (CPAO) and in consultation with the Department of Economic Affairs (DEA), has established an administrative arrangement for issuing unique employee IDs, and for collecting, transferring, reporting and recording monthly contributions under the NPS. Twelve State Governments have also decided to implement defined contribution pension schemes for their own new employees. The Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2005 was introduced in Parliament in the last Budget Session. This Bill is intended to pave the way for establishing the PFRDA as a statutory regulatory body, setting up of the formal institutional framework under the NPS and undertaking a variety of policy and strategy initiatives in keeping with the Government of India's objective of providing an effective and broad-based pension system to its citizens. The Standing Committee on Finance, which was given the task of examining the Bill, has also submitted their report.

Completed Technical and Research Assistance (2004-05)

In February 2004, the DEA engaged a firm as a consultant for a period of 12 months to provide research support in undertaking pension reforms. The terms of reference of DEA’s contract with the consultant included drafting of consultative papers on the process engineering of the NPS; the eligibility and selection criteria of the central recordkeeping agency (CRA), pension fund managers (PFMs) and points of presence (POPs); and production of a software tool for administering web-based surveys to members, Pay & Accounts Offices (P&AOs) and non-civil departments covered by the NPS.

Current Technical and Research Assistance Requirement (2005-06)

In order to carry the pension reform process forward, DEA intends to procure dedicated technical and research assistance by a local policy consulting firm for a period of 9 months. The scope of this TA will include work in the following 4 areas with specific deliverables within each area. The first set of deliverables, namely specific activities related to NPS implementation, will be provided within 5 months from the date of the contract. The consultant may provide the rest in 9 months.

Specific activities related to NPS implementation;
Strengthening and streamlining the current administrative arrangements for the NPS and extending its scope;
Capacity and knowledge building; and
Design of the PFRDA organisational structure and staff responsibilities.

1. SPECIFIC ACTIVITIES RELATED TO NPS IMPLEMENTATION

This will include technical assistance, policy analysis and research support to establish the NPS institutional architecture including licensing of service providers (CRA, PFMs, POPs, ARAs[1]). The expected tasks are broadly listed below:

1.1 Assistance with CRA implementation

The deliverables under this will include:

(i) Drafting of the CRA operations and licensing document in consultation with PFRDA and DEA;

(ii) Assisting PFRDA in drafting regulations on CRA;

(iii) Assisting PFRDA in the CRA licensing process;

(iv) Assisting the CRA in compiling necessary information on the central government's administrative arrangements for NPS for its employees; and

(v) Coordinating, in consultation with DEA and PFRDA, the administrative arrangements in respect of those States that decide to join the NPS, in order to facilitate smooth transfer to the central system.

1.2 Assistance with selection of Pension Fund Managers

This will include the following:

(i) Drafting of the PFM operations and licensing document in consultation with PFRDA and DEA;

(ii) Assisting PFRDA in drafting regulations on PFMs; and

(iii) Assisting PFRDA in the PFM licensing process.

1.3 NPS service delivery, sales and advisory services

This will include the following:

(i) Drafting of the operations and licensing document for POPs and ARAs in consultation with PFRDA and DEA;

(ii) Assisting PFRDA in drafting regulations on POPs and ARAs;

(iii) Assisting PFRDA in the POP and ARA licensing process; and

(iv) Compilation of information on the geographical distribution of existing entities/agencies/institutions, which can serve as POPs/ARAs under the NPS.

1.4 Member policies and rights under the NPS

The deliverables under this will include the following:

(i) Assisting PFRDA and DEA in drafting policy related to individual members covered under the NPS on a mandatory basis, such as, the operation of Tier-I and Tier-II accounts, limits, products, death and disability insurance, guarantees and portfolio risk management, exit policies, member rights, service benchmarks and grievance redressal mechanisms;

(ii) Assisting PFRDA to develop a subscribers’ grievance redressal mechanism and manual; and

(iii) Assisting PFRDA to set up an NPS helpdesk.

1.5 NPS operation/implementation document

The consultant will prepare an NPS operation/implementation document, which will include an activity chart with detailed timelines. This should be a comprehensive and exhaustive document in terms of detail regarding all activities required for operationalising the NPS with its full architecture.

2. STRENGTHENING AND STREAMLINING THE CURRENT ADMINISTRATIVE ARRANGEMENTS FOR THE NPS AND EXTENDING ITS SCOPE

The current administrative arrangements for the NPS also need to be strengthened in order to facilitate smooth transfer to the full architecture. The deliverables under this will, therefore, include the following:

(i) Providing inputs/working with an IT department or firm (to be appointed by the DEA) to set up an interim electronic CRA; which can be used by various central government departments (including autonomous bodies and Union Territories) as well as State governments for obtaining unique member IDs, recording information on new employees and member contributions and;

(ii) Designing a uniform data template for recording information on new employees and for channeling information and contributions to the CRA.

3. CAPACITY AND KNOWLEDGE BUILDING

There is a need to disseminate information appropriately to various stakeholders in order to facilitate smooth adoption and implementation of the NPS. The following deliverables are, accordingly designed:

· workshops with industry and independent experts on the policy framework and draft regulations for CRA, PFMs, POPs, sales and advisory services, and members, including sessions on the international experience with implementing similar pension systems;

· a national workshop for central government officials and state finance secretaries on NPS and as background for this event, the consultant will be required to produce a standard information kit on NPS adoption for UTs, State governments, Central (non-civil) departments, autonomous bodies, etc.

4. DESIGN OF THE PFRDA ORGANISATIONAL STRUCTURE AND STAFF RESPONSIBILITIES

This will include detailed mapping out of organisational responsibilities and functional divisions and should cover the following:

(i) designing the PFRDA organisational structure and staff responsibilities keeping in view factors such as the regulator’s responsibilities and areas where coordination is required with other regulators; and

(ii) designing a compensation structure for PFRDA staff keeping in view the practice in other jurisdictions.

This Request for Proposals (RFP) provides an illustrative list of the key priorities before the DEA and the PFRDA and deliverables by the consulting firm. However, based on the DEA's experience in 2004, the process for system implementation over the next 9 months is likely to be dynamic and may throw up several new challenges and tasks which are not currently visualized. A combination of flexible technical and research support by local experts, coupled with periodic peer reviews by global experts, will be a useful format for policy analysis and policy formulation on pension reforms for India.

Consultant Selection Process

The Department of Economic Affairs, Ministry of Finance, invites proposals from consulting firms, research agencies and institutes located in India for this assignment. One suitable entity will be selected to work with PFRDA and DEA on the activities and tasks outlined in this RFP. The following criteria will be considered for selection:

Experience and credentials of the consulting firm in the areas of pension policy analysis, research and policy formulation;

brief curriculum vitae (CV) of the consultants who will act as resource persons for this assignment and related tasks;
Comments on the RFP and understanding of the TA activities and implementation ideas; and

the financial proposals indicating the cost of allocating appropriate resources for the tasks outlined in this RFP and other technical inputs for a specified period.

Implementation Arrangements

The Pension Fund Regulatory and Development Authority and the Department of Economic Affairs (Capital Markets, External Commercial Borrowings & Pension Reforms Division) under the Ministry of Finance, Government of India, will jointly act as the Executing Agency (EA) for this assignment. An amount of USD 200,000 has been allocated for this assignment.

It is desirable that consulting services commence by November 2005. The firm engaged by DEA will be responsible for overall local project management including (a) coordination of the various tasks and deliverables under the assignment with PFRDA and DEA; (b) assisting the PFRDA and DEA in studies and research for implementation of the NPS; and (c) building broad-based capacity on pension reforms. The consulting team should include suitable consultants and research staff. The consulting inputs received by PFRDA and DEA under this assignment will be subjected to periodic peer reviews by competent pension sector experts, including those with regulatory experience, and economists.

The selected firm will submit an Inception Report outlining the work plan for the technical assistance within two weeks of start of services to the EA. This work plan will include the planned activities, methodologies and output of the assignment. Payment will be made in 3 (three) installments: (1) first installment on receipt of the Inception Report by the DEA; (2) second installment after 5 months; and (3) third installment after the DEA verifies completion of all specified TA deliverables. All payments shall be made to the consultants in INR and net of TDS. All payments (other than the TA advance payable on receipt of the Inception Report) shall be released by DEA only upon receipt of the audited statement of accounts along with a Utilization Certificate from the consultant.

Interested entities are requested to submit their proposals, alongwith a summary of their qualifications and experience in this area, a description of specific activities and tasks they will undertake for achieving the objectives of this assignment, the CVs of the key members of the team which will work on this assignment, as well as their detailed financial terms, in a sealed envelope, to the Joint Director (SE), Department of Economic Affairs, Ministry of Finance, Government of India, North Block, New Delhi 110001, latest by 1700 hours on October 28, 2005.

Proposals received after this date or those that do not furnish all the above information are liable to be rejected without consideration. The decision of the Department shall be binding and no further queries would be entertained.

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[1] Authorised Retirement Advisors (ARAs)