Pension parking lot expanded to gold, AIFs, Invits

Unlocking the flow of annual retirement savings worth about ₹1 trillion into a wider range of assets Unlocking the flow of annual retirement savings worth about ₹1 trillion into a wider range of assets, including alternative investment funds (AIFs), equities, gold and silver exchange traded funds (ETFs), infrastructure investment trusts (Invits) and Basel-III tier-I bonds issued by state-owned shadow banks, the Pension Fund Regulatory and Development Authority (PFRDA) has significantly liberalised its investment guidelines for the National Pension System (NPS).

- GULVEEN AULAKH & VIKAS DHOOT

Speaking to Business Standard, PFRDA Chairperson S Ramann said the opening up of fresh investment avenues for NPS assets is aimed at improving returns for its millions of members, which include government employees hired after January 1, 2004, and private citizens who have voluntarily signed up to build a nest-egg for their old age.

"The context of these changes is to do with subscriber returns, as we had been getting feedback from our pension fund managers that enhancing the spectrum of assets they can invest in, would not only boost returns but also ensure more stable returns owing to diversification,” explained Ramann, who oversees India's retirement savings worth ₹16.5 trillion.

The new investment norms that kick in from January 1, 2026, raise the cap for NPS investments in the 201st to 250th equity constituents of the BSE-250 and NSE-250 indices to 10 per cent of a fund’s overall equity bets (capped at 25 per cent of total assets), from 2 per cent earlier.

Moreover, the pension regulator has allowed investments in initial public offers (IPOs) of firms if their full float market capitalisation (mcap) based on the lower band of issue price is equal to or higher than the mcap of the 250th firm in the NSE 250 Index.

"There is too much of a herd mentality when it comes to picking stock investments, and so we have decided to expand the universe of stocks to invest in. The aim is to gradually provide more scope for fund managers to do active stock picking," the PFRDA chief said.