New Delhi: The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a significant upgrade for pension savers. For the first time, NPS, UPS and APY schemes will be allowed to invest in silver and gold ETFs, along with the Nifty 250 index, opening the door to wider and more diversified investment options.
That’s not all as these schemes can now channel funds into Alternative Investment Funds (Category I and II) as well. All these changes were detailed in a new master circular outlining the updated investment guidelines for various government, corporate, NPS Lite and Atal Pension Yojana schemes.
New Master Circular Defines Fresh Investment Limits
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The new master circular replaces several older investment guidelines and clearly outlines how much NPS, UPS, and APY funds can invest across different asset classes. These include equity, debt, short-term instruments, ETFs such as gold and silver, and various other schemes.
As per the PFRDA circular released on December 10, 2025, the regulator clarified the legal basis and immediate effect of the updated guidelines. It stated: “This Master Circular is being issued in exercise of powers of the Authority conferred under sub-clause (b) of sub-section (2) of Section 14 read with Section 23 of the PFRDA Act, 2013 and sub-regulation (1) of Regulation 14 of PFRDA (Pension Fund) Regulations, 2015 as amended from time to time. This master circular supersedes the earlier circular dated 28.03.2025 and all the circulars/ letters mentioned in the Appendix. This master circular shall be effective immediately.”
Revised Investment Options Under New Pension Rules
1. Equity & Related Investments — Up to 25%
Companies in the NIFTY 250 index
Select BSE 250 stocks outside NIFTY 250
90% of equity exposure must stay within the top 200 stocks
Equity mutual funds (up to 5% of the equity portion)
Sensex/Nifty-based ETFs
Derivatives allowed only for hedging (max 5% of equity)
Participation in IPOs, FPOs and OFS under strict norms
Index changes must be updated within six months
2. Government Securities (G-Secs) — Up to 65%
Central & State government securities
Fully serviced PSU bonds issued under the EBR route
Gilt mutual funds (limited to 5% of the G-Sec portion)
This remains the backbone of NPS and APY portfolios due to low risk and government backing.
3. Asset-Backed, Trust-Structured & Miscellaneous — Up to 5%
CMBS and RMBS
Units of REITs and InvITs
Asset-backed securities
AIF Category I & II (capped at 1% for government sector schemes)
Gold & silver ETFs (capped at 1% of AUM)
Most instruments here require a minimum AA rating to ensure credit stability.
4. Corporate Debt & Other Debt Instruments — Up to 45%
Listed corporate bonds (typically AA-rated or above)
Basel III Tier-1 bonds (max 2% of AUM)
Rupee bonds issued by IFC, IBRD and ADB
Bank term deposits (up to 10% per eligible bank)
Debt mutual funds (limited to 5% of the debt component)
REIT/InvIT-issued debt
AAA-rated municipal bonds
Additional rules:
Requires AA ratings from two agencies (with limited exceptions)
Up to 10% of the debt portion may be AA– to A-rated
Anything below AA must be hedged through credit default swaps
Residual maturity must align with long-term pension obligations
5. Short-Term Debt Instruments — Up to 10%
Treasury Bills
Commercial Papers (A1+ rating from two agencies)
Certificates of Deposit
Short-duration mutual funds (liquid, overnight, ultra-short)
This bucket helps pension funds manage near-term liquidity needs.
