NPS Investment Rules: A major change has been made for those investing in government pension schemes. The Pension Fund Regulatory and Development Authority (PFRDA) has approved new investment options under NPS, APY, and UPS. Customers of these schemes will no longer be limited to equities and bonds, but will also be able to invest in gold and silver ETFs, the Nifty 50 index, and alternative investment funds. This decision was announced through a master circular issued on December 10.
Now you can also invest in commodities.
Previously, only government and state employees were eligible to invest in gold and silver ETFs, but now this has been extended to Corporate CG, NPS Lite, and Atal Pension Yojana. Under the new rules, pension fund customers will be able to invest a maximum of 5 percent of their total investment in gold and silver ETFs. This will allow investors to earn returns from the commodity sector as well.
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Why is this change important?
Gold and silver prices have seen a sharp increase in the past few years. Therefore, the government wants pension investors to benefit from returns from these assets. According to experts, this could make the NPS a balanced and robust asset allocation platform, with a balance between equities, bonds, and now commodities.
Caution is essential before investing
Experts say that investing in gold and silver should be decided based on risk profile and long-term goals. Pension funds are for the long term, so it is important to carefully determine the investment ratio. The PFRDA has also clarified that pension funds and NPS trusts will take necessary steps to control investment costs.
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Government Contribution to NPS, UPS, and APY
Under the NPS, the central government contributes 14 percent of an employee’s basic salary and DA, while the employee contributes 10 percent. Under UPS, the government contributes 10 percent and an additional 8.5 percent. Under the APY scheme, the government co-contributes 50 percent of the beneficiary’s contribution up to ₹1,000 annually.
What are the investment limits?
According to the new rules, the investment limit in government securities, other securities, and mutual funds will be 65 percent. Investments can be made up to 45 percent in debt instruments, 10 percent in short-term debt, 25 percent in equity, and 5 percent in asset-backed and diversified investments.