NPS pension funds can invest in gold and silver ETFs, IPOs, Nifty 250 shares: All you need to know

In a move enabling portfolio diversification, the Pension Fund Regulatory and Development Authority (PFRDA) has expanded the scope of investment options for pension funds under the national pension system (NPS).

Pension funds can now allocate a small portion of their portfolios to SEBI-regulated assets such as Gold and Silver ETFs. Investments in IPOs, stocks under Nifty 250, equity mutual funds, ETFs, etc., are also allowed under "Scheme / Asset Class E" for non-government subscribers.

On December 10, 2025, the pension regulator issued two master circulars on investment guidelines for pension funds under various schemes under NPS for non-government and government subscribers. This article lists all the investment options allowed to pension funds under NPS "Scheme E" for non-government subscribers.

Nifty 250 stocks

Stocks that are constituents of the NIFTY 250 Index are eligible for investments. However, constituent stocks of the BSE 250 Index, which are not part of NIFTY 250, are also eligible for investments.

However, 90% of the Asset Class/Scheme AUM shall be invested only in to the top 200 stocks of NIFTY 250 Index with flexibility to invest up to 10% in the remaining eligible stocks.

Gold and silver ETFs, Equity AIFs, REITs

Pension Funds can now invest in the units issued by SEBI-regulated Gold and Silver ETFs, units issued by Real Estate Investment Trusts (REITs), and equity-oriented ‘Alternative Investment Funds’ (Category I and Category II only)

The aggregate investment under units of REITs, equity-oriented AIFs, and Gold & Silver ETFs shall not exceed 5% of the AUM of Scheme / Asset Class E.

For investing in REITs, the Trust should have minimum rating of ‘AA’ or equivalent rating in the applicable rating scale from at least two credit rating agencies registered by SEBI.

Equity mutual funds

Pension funds can invest in units of equity schemes of mutual funds. Investment under such mutual funds shall not exceed 5% of the AUM under Scheme/Asset Class E at any point in time. Further, fresh investment in such mutual funds shall not exceed 5% of the fresh inflows invested in the year.

Nifty 50 ETFs and Index Funds

Pension Funds can invest in ETFs/Index Funds regulated by SEBI that replicate the portfolio of either BSE Sensex Index or NSE Nifty 50 Index.

Disinvestment ETFs and Exchange Traded Derivatives

Pension funds can also invest in ETFs regulated by SEBI that are constructed specifically for the disinvestment of shareholding of the Government of India in body corporates.

They can also invest in Exchange Traded Derivatives regulated by SEBI having the underlying of any permissible listed stock or any of the permissible indices (BSE Sensex Index or NSE Nifty 50 Index), with the sole purpose of hedging. The portfolio invested in derivatives in terms of contract value not exceed 5% of the AUM under Scheme/Asset Class E at any point of time.

IPOs and FPOs

Pension Funds can invest in Initial Public Offering (IPO), Follow on Public Offer (FPO) and Offer for Sale (OFS) of companies, approved by SEBI subject to fulfilment of the following conditions:

• Equity offering through IPO are proposed to be “listed” in BSE or NSE and full float market capitalization calculated at lower band of IPO issue price should be equivalent or greater than the market capitalization of the 250th company as per the NIFTY 250 Index list.

• Shares offered under Follow on Public Offer (FPO)/Offer for Sale (OFS) should be listed on BSE or NSE and constituent in the list of Top 250 stocks as per the Nifty 250 Index.

• Board approved Investment Policy of Pension Funds should contain detailed guidelines/procedure for investments in IPO. Investments in Equity Shares through IPO/FPO or OFS shall be reported to NPS Trust within 30 days from the date of investment.

• In case a Pension Fund has invested through IPO and it fails to be in the latest published list of NIFTY 250 Index, a time period of maximum one year from the date of listing shall be provided to the Pension Fund for making a decision on exiting such shares.

• PFs are allowed to invest in Shares through Secondary Market, eligible under i & ii. Subsequent to any changes in the NIFTY 250 Index, Pension Funds would have to rebalance their portfolios in line with eligible stocks, within a period of six months.

Apart from the above, pension funds are also allowed to temporarily park the inflows/funds in short-term debt instruments.