Even as Dalal Street hopes for better times by the second half of 2009, it can look forward to a fresh set of long-term investors starting this April. On Tuesday, an expert group led by HDFC chairman Deepak Parekh and appointed by the interim Pension Fund Regulatory Development Authority (PFRDA) submitted its recommendations on norms for the Citizens? Pension Scheme, with liberal investments permitted in NSE Nifty 50 index.

The PFRDA is keen to launch the Citizens? Pension Scheme on April 1, 2009 and is in the process of appointing six short-listed fund managers and 23 entities that will collect contributions across the country. According to the Parekh panel report, which has to be formally accepted by the PFRDA board and the New Pension Scheme trust, citizens have been allowed to design their own pension fund within three sets of securities: equities, government bonds and corporate debt.

Currently, the New Pension Scheme covers only those who joined the civil services after January 1, 2004. But their savings are invested in a pattern prescribed for non-government provident funds, including the Employees? Provident Fund Organisation. The pattern allows up to 15% investments in equities, though the EPFO board has yet to accept this.

The expert group led by Parekh has mooted equity investments, but only through a standardised portfolio such as an index fund, specifically the Nifty 50. ?The Nifty 50 index has the most comprehensive and broad-based list of companies and all but one of the BSE 30 companies are part of it,? Parekh explained.

Citizens who choose to manage their pension fund actively are free to decide how much they wish to invest in each category. ?A member can even decide to allocate 100% in equities or government securities if he likes,? PFRDA chairman Dhirendra Swarup said.

But since the scheme is aimed at expanding the social security net to the country?s 372 million-odd unorganised sector workforce, a default option has been designed for those who may not be able or willing to pick their own asset allocation. ?Investors have the right to choose, but often they may leave their choices blank. Then the auto choice kicks in,? Parekh said.

The auto choice will be based on a life-cycle planning fund, which suggests higher exposure to equities when a worker is young, gradually reduced as he or she nears retirement. ?For those under 35, the auto choice will start at 65% equities, 10% government bonds and 25% in corporate paper. After the worker crosses 35, the equity exposure will reduce by 2.5% annually, so that by the time they near retirement, there will only be 10% exposure to equities,? Parekh said.

The minimum investment to be made annually under the new scheme is Rs 6,000 and PFRDA is still finalising conditions for premature withdrawals. But current thinking is aimed at restricting withdrawals only for building a residential house or meeting expenses for critical illnesses.

Though the fund managers will compute the value of members? savings daily, they will be disclosed only once a quarter. Moreover, for the corporate and government debt portions of the portfolio, independent third-party valuers will be appointed. PFRDA will finalise the norms and a communication strategy to convey this to potential savers by the end of February.