The Pension Fund Regulatory and Development Authority (PFRDA) on Thursday allowed the National Pension System (NPS) to include gold and silver exchange-traded funds (ETFs) among its investment options.
NPS subscribers can now invest in gold and silver ETFs offered by mutual funds, with exposure restricted to 5% of the scheme’s assets under management (AUM).
“Investors in the NPS have a better average investment tenure (holding period) compared to other investment avenues, and they would have a better investment mix now,” said Sumit Shukla, managing director and chief executive of Axis Pension Fund. “Both old and new subscribers would benefit from the move.”
As of 11 December 2025, 24 karat gold has delivered a year-to-date return of 62%, from ₹7,800 per gramme, while silver is trading 98% higher than its 1 January price of ₹79,376 per kilogramme in the 2025 calendar year.
Why only ETFs
“Restricting it to Sebi-regulated gold and silver ETFs and not other non-regulated means of investing in commodities ensures that there is legal recourse available in case of any complaints,” said certified financial planner Kiran Telang.
Additionally, investments in physical commodities require back-end preparation, including stocking the gold in custodian vaults, insuring against risk, and hedging, which must be built over a period by pension fund managers.
“As pension fund managers, we would have to build our expertise in directly investing in commodities. Until then, ETF investments have been permitted,” Shukla said.
More asset classes
The pension fund regulator has further expanded the NPS investment universe by including Nifty 250 stocks. However, 90% of the scheme’s AUM must be invested only in the top 200 stocks of the Nifty 250 Index. Additionally, NPS fund managers can now choose from debt papers with lower ratings.
“Expanding the investment universe to include debt papers with an AA rating, from an AAA rating earlier, is a significant change,” Shukla added.
With all asset classes available under one roof, the NPS could attract more investors. “This is a big move from the PFRDA, and it would help the NPS become a one-stop asset allocation platform as gold and silver are now permitted, after we saw corporate bonds being eligible,” said Manav Modi, commodity analyst-precious metal research, Motilal Oswal Financial Services.
“These are pension funds, and the weightage needs to be decided. One must assess how much risk is attached to different asset classes,” Modi added.
While the investment universe expands with both a higher number of stocks and commodities, one must continue using other investment alternatives, as the withdrawal procedure and protocol could be a concern.
“It expands the NPS pool of asset classes to enable a more diversified portfolio. However, due to its structure as largely a retirement savings and withdrawal-oriented instrument with some flexibility, investors will still need to use other investment vehicles to support other financial goals for their families that will emerge besides retirement,” said Vishal Dhawan, founder and chief executive of Plan Ahead Wealth Advisors.
Annuity concerns
However, the overall drawback of annuity investments persists. “Under the NPS, taxation during redemption remains unchanged, and 40% of the funds must still be used to purchase an annuity. For those who struggle with investment discipline and need to plan for retirement, this instrument can be useful, especially now that it offers improved diversification. While the cost structure is favourable, the annuity issue remains,” Telang said.
The PFRDA is reportedly considering reducing the mandatory annuitization requirement to 20% from the current 40%. Among other sweeping changes, the NPS could have a lock-in of 15 years instead of the current lock-in of retirement age.
