In a key financial sector reform, India has opened up the pension fund sector to private and foreign players, fulfilling a promise made by Finance Minister Palaniappan Chidambaram in his budget five months ago.

An ordinance was issued on Thursday setting up the Pension Fund Regulatory and Development Authority (PFRDA) to undertake promotional and developmental functions tor the pension sector.

The government will soon decide on the extent of Foreign Direct Investment (FDD to be allowed in the sector, a senior finance ministry

official said.

Several insurance and pension fund companies including Aviva, Life Insurance Corporation of India, State Bank of India Life and Templeton have expressed keenness to set up shops as pension fund managers.

The PFRDA will choose pension fund managers who will run three types of pension plans with varying degrees of investment limits for exposure to equity markets.

The PFRDA has been given statutory status to protect the interests of the investors, the official said.

All recruits to India government jobs from January 1,2004 have been included in the new contributory

pension scheme under which an employee has to contribute ten percent of his or her salary to the pension fund. While, the government will contribute a matching amount to generate acorpus fund to finance the pension.

At present, the total salary and pension bills of federal and state governments in India constitute 9.2 percent of Gross Domestic Product.

The ordinance on setting up the pension fund regulatory body came a few days after the government had passed a similar order with regard to introducing the product patent regime in India to meet WTO obligations from today.