In what would provide a major boost to India?s retail equity cult, over a million potential new investors could be able to put their retirement savings in the stock market from April 2010.

The Pension Fund Regulatory and Development Authority (PFRDA) is finally working on converting the pooled investments of government employees under the New Pension Scheme (NPS) into unitised individual accounts.

?This is what the NPS was envisaged to do. The original plan was to allow government employees to exercise their investment options. Once the NPS accounts are unitised, we will put forward the proposal to the finance ministry to allow all subscribers to choose their own investment portfolio,? a senior PFRDA official told FE .

Central government employees have been under the NPS since January 1, 2004, but because of the failure of the Controller General of Accounts to transfer their individual contribution records to the NPS record keeper, their pension savings have been invested as a pool fund on the basis of the investment pattern notified for non-government provident funds like the employees provident fund organisation (EPFO). Once their accounts are unitised, they would also enjoy the same flexibility in investment options as private citizens who have been allowed into the NPS since May 2009.

Citizens can currently choose from five different asset allocations with different weightages for equities, government and corporate bonds. While there is a 100% government bond investment option for the risk-averse, equity investments of up to 50% of their contributions are permitted at the other end of the risk spectrum. As per the pattern currently being followed, upto 15% of contributions can be invested in equities.

?The retail equity market in the developed world has developed due to pension funds. In India, the contributions to the NPS would allow new money to enter the equities market in a systematic and steady flow. This would be long-term money, which can be used in long-term asset building,? commented UR Bhatt, managing director, Dalton Capital Advisors India Pvt Ltd.

Handing over the reins of their retirement money to employees has become possible now because the transfer of data on individual accounts to the PFRDA?s record keeping agency?the NSDL is finally nearing completion. In fact, with the Pay and Accounts Officers transferring individual account data for 4 lakh employees to the NSDL, the PFRDA has for the first time sent out provisional account statements for these subscribers to the PAOs in October.

By January 2010, it hopes to send individual statements to all its subscribers. ?We plan to have individual retirement accounts for all government employees by April next year. This will mean that they can go online and check their Net Asset Values, contribution details, etc,? the official said.

Simultaneously, the PFRDA is working along with its institutional adviser Wipro Technologies to work out ways to separate the pooled accumulations of Rs 3,200 crore and transfer them into the individual accounts of all its subscribers, which won?t be easy. The interim regulator is simulating live data to find out best-case scenarios so as to decide if accumulations should be divided retrospectively or prospectively. ?The finance ministry will have the final say on which is the best scenario,? the official said.

?When the shift in accounting methodology happens, any loss or gain will have to be recognised. In the private sector, invariably, it is the fund or the company who bears this.

It would be instructional to know how the PFRDA manages this,? said Amit Gopal, vice-president, India Life Capital.