Government employee vs private sector: Who gets more gold and silver exposure under new NPS rules?

The Pension Fund Regulatory and Development Authority (PFRDA) has allowed pension funds under the National Pension System (NPS) to invest a small portion of scheme portfolios in SEBI-regulated gold and silver exchange-traded funds (ETFs).

"Provided that the aggregate investment under sub-category (f)* shall not exceed the 1% of the respective Scheme AUM managed by the Pension Fund," the NPS "Master Circular on Investment Guidelines for Government Sector" says.

For government subscribers, pension funds are required to follow the limits below while investing:

1. Govt securities and related investments: Up to 65%

2. Equity and related investments: Up to 25%

This includes stocks under the Nifty 250 Index and BSE 250 Index. However, 90% of the total equity investment must be in the top 200 stocks of the Nifty 250 Index.

Pension funds can also invest in units of equity mutual funds (up to 5%), ETFs & Index Funds tracking Nifty 50 or BSE Sensex Index, Exchange Traded Derivatives and IPOs.

3. Debt instruments and related investments: Up to 45%

This includes listed debt securities issued by corporate bodies, banks, and financial institutions, term deposits of scheduled commercial banks, units of debt mutual fund schemes, debt securities issued by regulated REITs and InVITS, and debt ETFs issued by the government of India.

The investment in debt mutual funds and debt ETFs cannot be more than 5% of the total debt portfolio.

4. Short-term debt instruments: Up to 10%

This includes money market instruments comprising Treasury Bill, commercial Paper and Certificates of Deposit, term deposits of up to 1 year, and short-term debt schemes of mutual funds having an AUM of a minimum ₹5000 crore.

5. Asset-backed, trust-structured and miscellaneous investments: Up to 5%

This includes units of gold and silver ETFs regulated by SEBI, REITs, InvITs, SEBI-regulated AIFs (Category 1 and Category II only). Investments in AIFs is capped at 1% of the scheme AUM.

"At any given point of time the percentage of assets under each category should not exceed the maximum limit prescribed for that category and also should not exceed the maximum limit prescribed for the sub-categories, if any. However, asset switch because of any RBI-mandated Government debt switch would not be covered under this restriction," the circular says.