TaxTMI 
TaxTMI 
International Financial Services Centres Authority (Pension Fund) Regulations, 2026
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....ectives 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 Securit....
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....bscriber" 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 regulat....
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....l. 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....
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....municate 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 ....
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....e 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 P....
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....ith 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; (b) Fixed income instruments, such as government bonds, corporate bonds, private debt; (c) Alternative Investment Funds; (d) Frequently traded commodities; (e) Cash and short-term instruments for liquidity management; or (f) Such other financial products or instruments, as may be specified by the Authority. (2) The specific investment limits for each c....
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....l-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 investmen....
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....dures; (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....
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...., 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....
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....n 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,....
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....ce 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 deter....
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....olio 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-Ca....
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....e 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 ....
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....tion, 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 issu....
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....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 rul....