PFRDA Issues New Master Circular on Investment Guidelines for UPS, NPS and APY Schemes

PFRDA Issues New Master Circular on Investment Guidelines for UPS, NPS and APY Schemes

Pension Fund Regulatory and Development Authority (PFRDA) has issued a Master Circular on Investment Guidelines covering UPS, NPS and Atal Pension Yojana (APY) schemes, applicable to Central and State Government default schemes, Corporate CG, NPS Lite, APY and the APY Fund Scheme.

The master circular, dated December 10, 2025, comes into effect immediately and supersedes the earlier circular issued on March 28, 2025, along with several previous circulars and letters consolidated into a single framework.

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The circular has been issued under the powers granted to PFRDA by the PFRDA Act, 2013 and the Pension Fund Regulations, 2015. It aims to provide a consolidated, uniform and updated set of investment rules for pension funds and NPS stakeholders, ensuring transparency, continuity and regulatory clarity.

Under the revised guidelines, pension fund investments are permitted across five broad categories: Government securities, debt instruments, short-term debt instruments, equities, and asset-backed or trust-structured investments.

Clear limits have been prescribed for each category, including up to 65% in government securities, 45% in debt instruments, 10% in short-term debt, 25% in equities, and 5% in asset-backed and alternative investments, subject to detailed sub-limits and rating requirements.

The circular lays down stringent credit rating norms, exposure limits to individual issuers, industries and sponsor groups, and enhanced safeguards to reduce concentration risk. Investments in lower-rated instruments beyond prescribed thresholds must be fully hedged using credit default swaps.

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The master circular also provides clarity on investments in REITs, InvITs, municipal bonds, infrastructure debt funds, alternative investment funds, gold and silver ETFs, and Bharat Bond and other government-backed debt ETFs.

Equity investments remain restricted to eligible stocks under the NIFTY 250 framework, with additional safeguards on IPO, FPO and OFS investments. Pension funds are required to rebalance portfolios following changes in index composition within stipulated timelines. Derivatives are permitted strictly for hedging purposes, within defined limits.

Special provisions have been included for NPS Tier-II Tax Saver Scheme (TTS), Composite Tier-II schemes and APY Fund Scheme, including exemptions on exposure norms until schemes reach a minimum corpus size.

The circular also clarifies rules on inter-scheme transfers, use of securities as margin with CCIL, investment management fees, and cost controls to avoid double charging.

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PFRDA has emphasised that pension funds carry fiduciary responsibility to invest prudently in the best interest of subscribers. NPS Trust will closely monitor compliance, while pension funds are required to maintain transparency, robust due diligence and accountability in all investment decisions.

By consolidating nearly a decade of circulars into a single master document, the authority aims to simplify compliance, strengthen governance, and align pension fund investments with evolving market practices while safeguarding the long-term retirement savings of subscribers.