PFRDA Issues New Investment Rules For Government-Sector Pension Schemes

On December 10, 2025, the Pension Fund Regulatory and Development Authority (PFRDA) released ‘Master Circular on Investment Guidelines issued for government‑sector pension schemes’, including Unified Pension Scheme (UPS), National Pension System (NPS) for Central/State Government subscribers, Corporate Government (CG) NPS, NPS Lite, Atal Pension Yojana (APY), and APY Fund Scheme.

• The Master Circular is issued under the powers conferred on the Authority by 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 the PFRDA (Pension Fund) Regulations, 2015, as amended from time to time.

About PFRDA Master Circular:

Objective: The circular covers all Pension Funds (PFs) and the National Pension System (NPS) Trust under the PFRDA Act and Regulations, aiming to streamline compliance, enhance transparency, and strengthen risk management across government‑sector pension fund investments.

Effective from: The PFRDA master circular takes effect immediately and replaces the guidelines issued in March 2025.

Pension Fund Investment and Allocation Framework:

Government Securities (G-secs): Pension funds are allowed to invest up to 65% of the portfolio in the G-secs, the safest instruments.

• They are also allowed to invest a maximum of 5% of the total G-Secs portfolio in the units of Mutual Funds (MFs) set up as dedicated funds for investment in Government securities and regulated by the Securities Exchange and Board of India (SEBI).

Debt Instruments: Funds may invest up to 45% in corporate bonds and other debt instruments such as infrastructure debt and bank deposits, subject to credit-rating requirements.

• The Pension funds can invest in securities having investment grade rating below ‘AA‘, provided that, investments in securities rated from ‘AA-’ to ‘A’ shall not exceed 10% of the total debt instruments portfolio in the concerned scheme.

Short-term debt instruments: Pension Funds can make investments up to 10% in short term debt instruments like Commercial Paper (CP), Certificate of Deposit (CoD) etc.

• Investment in CPs can be made only if they are rated A1+ by at least two SEBI-registered Credit Rating Agencies (CRAs).

Equity Exposure: Equity exposure is capped at 25%, with funds allowed to buy shares through IPOs, FPOs and offers for sale, as well as through index-linked investments.

Asset Backed Funds: A maximum of 5% can be invested in Asset Backed, Trust Structured and Miscellaneous Investments.

• The funds shall invest in only those AIFs whose corpus is equal to or more than Rs 100 crores (Cr) and exposure to single AIF shall not exceed 10% of the AIF size.

Broadened Investment Options: Pension funds (PFs) can now invest in Gold & Silver Exchange-Traded Fund (ETF), Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) (with rating and exposure limits), AAA-rated Municipal Bonds (MBs), and Government Debt ETFs, enhancing diversification, risk management, and liquidity.

Subscriber Investment Options: For Central Government NPS/UPS subscribers, PFRDA has added two new auto investment choices, complementing existing Active and Auto frameworks and providing more tailored, diversified portfolio options.

About Pension Fund Regulatory and Development Authority (PFRDA)
PFRDA was initially established as a regulatory body in 2003 to promote, develop and regulate the pension sector in India. Later, it was granted a statutory body status through PFRDA Act, 2013 passed in September 2013 and the same was officially notified on February 1, 2014.

•  It comes under the jurisdiction of Department of Financial Services (DFS), Ministry of Finance (MoF).

Chairman – Sivasubramanian Ramann
Headquarters – New Delhi, Delhi