The government will operationalise the interim Pension Fund Regulatory and Development Authority and come up with the new pension scheme for about 100,000 employees from January 1, 2004.

An interim central record-keeping agency would also be set up by January, but would be given final shape after 2-3 months, U K Sinha, joint secretary (capital markets) in finance ministry, said addressing a seminar in New Delhi.

He said the interim regulator would come up with the guidelines and invite bids from fund managers interested in entering the pension sector.

PFRDA would also spell out the foreign direct investment limit and the minimum entry capital in the pension sector.

The Cabinet has already approved the proposal of an interim PFRDA and the basic structure is ready.

However, the government has yet to appoint the chairman and the two whole-time and two other members of PFRDA.

Till the fund managers come up, the Centre would transfer 10 per cent of the salary to an escrow account with the Reserve Bank of India, which would be allocated later to various funds of the choice of employees, consultant to finance minister, Ajay Shah, explained.

The new pension regime would offer consumers with three choices -- a debt fund, a growth fund with higher equity exposure, balance fund with a equal mix of equity and debt.

The new pension schemes would be unit-linked, which means the net asset value of the fund would fluctuate with the day-to-day market price of securities.

The newly defined contribution pension system would be applicable to new recruits in the government.

While the old government provident fund would be discontinued, the new regime would envisage that 10 per cent of the salary goes to the pension along with a matching contribution from the government.

The government will also allow private companies and unorganised sector to become part of this system at a later stage.

Speaking on the occasion, C B Bhave, managing director of National Securities Depository Ltd, said the regulator would have to mandate the operations of a central record-keeping agency, supervise the fee structure, license the asset management companies and carry out regulatory oversight.

While NSDL would be a strong contender for CRA, insurers and fund managers like ICICI Prudential, HDFC Standard Life, Principal Financial, Templeton, DSP Merrill Lynch and Kotak are keenly waiting for the guidelines to come up and then decide on the pension foray.