The Finance Minister of India, Nirmala Sitharaman, recently launched the NPS Vatsalya scheme through which an individual can invest in his or her child’s pension account. You can enroll in the scheme either online or by visiting a bank or post office.

At 75 locations across the nation, NPS Vatsalya was launched concurrently, and more than 250 permanent retirement account numbers (PRAN) were given away to minor subscribers. Children in schools enthusiastically attended the event at all the locations.

Additionally, Smt. Sitharaman and Shri Chaudhary gave minor subscribers permanent retirement account number (PRAN) cards who came from various regions of the nation.

At the program’s launch, Sitharaman stated that NPS has produced extremely competitive returns and gives consumers the choice to save while guaranteeing their future earnings.

Children can now access NPS Vatsalya, an expansion of the current NPS. NPS has 1.86 crore subscribers and ₹ 13 lakh crore in Assets Under Management (AUM) over the past ten years.

“My appeal to all parents is that when you attend a child’s birthday party, you can take cakes or other gifts, but money to invest in NPS Vatsalya will also be a form of gift. It will be a lifelong contribution to the child’s future,”

Finance Minister Nirmala Sitharaman

What is NPS Vatsalya Scheme?

NPS Vatsalya is a saving-cum-pension scheme being managed and supervised by the Pension Fund Regulatory and Development Authority (PFRDA), India. The program is planned for children who are 18 years and below. This program also enables parents to contribute to the accounts of the minors until they reach adulthood. It is outlined in the 2024–2025 Union Budget.

Eligibility

The NPS Vatsalya account can be opened by any individual below the age of 18 years. It will automatically shift to the normal NPS account upon attaining 18 years of age. The pension will be made available from this account only after the age of sixty.

Documents Required

Minor’s Date of Birth (birth certificate, school leaving certificate, or passport)

KYC documentation (proof of identity, Aadhar card, or driving license)

PAN Card (Permanent Account Number) or a Form 60 declaration

For guardians who are non-resident Indians (NRIs) or overseas citizens of India (OCIs), a NRE/NRO bank account for the minor is necessary.

How to Open Your NPS Account?

NPS Vatsalya can be opened through (POPs) Points of Presence, which are mostly in major banks, India Post, pension funds, and e-NPS. ICICI Bank said the scheme was launched by opening a few children’s accounts under NPS Vatsalya. New subscribers also got an identity Permanent Retirement Account Number (PRAN) card for their NPS Vatsalya account.

CLICK HERE to open a NPS account

Do NRIs have access to this service?

Both non-resident Indians (NRIs) and Overseas Citizenship of India (OCI) cardholders can participate in this scheme. Currently, the NRI and OCI subscribers have a provision to make contributions to the NPS Vatsalya accounts through NRE or NRO accounts.

What are the exit and withdrawal strategies?

There is a provision to lock in for three years. Following that, up to 25 % of the amount can be withdrawn for education, specified illness, and disability. The amount can be withdrawn a maximum of three times. If the corpus exceeds INR 2.5 lakh, 20% of the corpus may be withdrawn in one lump sum, and 80% of the corpus may be used to purchase an annuity. The guardian would receive back the entire corpus if the minor passed away.

The first step of opening an NPS Vatsalya account requires a minimum deposit of Rs 1,000. Additionally, they stated that there is no cap on the amount you want to deposit. At least Rs 1,000 must be contributed annually as the subsequent contribution.

Investment Choices

There are three types of accounts or investment choices for parents.

1) The default choice is the LC-50 (50% equity) Moderate Life Cycle Fund.

2) Auto Choice: Guardian may select the Aggressive Lifecycle Fund (LC-75, or 75% equity), the Moderate Lifecycle Fund (LC-50, or 50% equity), or the Conservative Lifecycle Fund (LC-25, or 25% equity).

3) Active Selection: Up to 75% of funds are allocated to equity, 100% to corporate debt, 100% to government securities, and 5% to alternative assets are actively chosen by Guardian.