NPS, UPS, APY: If you’re a member of the National Pension System (NPS), Unified Pension Scheme (UPS), or Atal Pension Yojana, this news is for you. The pension regulatory body, PFRDA, has issued a circular, significantly revising investment rules. These schemes are now permitted to invest in gold and silver ETFs, the Nifty 250 Index, and alternative investment funds. This new system is effective immediately.
What changes have happened?
Under the new rules, pension funds will now be able to invest up to 65% of their portfolio in government securities. Government securities include bonds issued by the central and state governments, public sector undertakings (PSUs), and gilt funds. Furthermore, the investment limit for corporate debt is set at 45%, which includes highly rated corporate bonds, bank term deposits, debt instruments of REITs and InvITs, AAA-rated municipal bonds, and bonds issued by multilateral agencies.
For short-term needs, pension funds can invest up to 10% in short-term debt instruments. The maximum limit for equity investments is 25%. This category will only include shares of Nifty 250 and select BSE 250 companies, equity ETFs, and a limited number of mutual funds.
The most significant change concerns investments in alternative investment instruments. Pension funds will now be able to invest in REITs, InvITs, Category I and II AIFs, and gold-silver ETFs. However, the overall investment limit in this category is 5%, and 1% for gold-silver ETFs and AIFs. Strong emphasis has also been placed on risk management. The total investment in any single industry will not exceed 15%. Similarly, the investment limit will not exceed 5% in a sponsor group company and 10% in a non-group company.