NPS Vatsalya Scheme: A New Pension Plan for Children's Future
MAS Team | 19 September 2024
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Finance Minister Nirmala Sitharaman launched the NPS Vatsalya scheme on September 18, 2024, allowing parents to invest in pension accounts for their children's future. This extension of the National Pension Scheme (NPS) enables parents to open pension accounts for their minor children, with the Pension Fund Regulatory and Development Authority (PFRDA) overseeing the scheme.
 
To open an NPS Vatsalya account, parents can subscribe online or visit a bank or post office. The minimum initial contribution is Rs1,000, with an annual contribution of the same amount required thereafter. Children below 18 are eligible, and both the child and parent/guardian must be Indian citizens and comply with Know Your Customer (KYC) requirements.
 
The scheme offers various investment choices, including a default Moderate Life Cycle Fund (LC-50) with 50% equity allocation. Parents can also opt for Auto Choice life cycle fund - Aggressive: LC-75 (75% equity); Moderate: LC-50 (50% equity); Conservative: LC-25 (25% equity) or Active Choice life cycle fund options - Guardian actively decides allocation of funds across Equity (up to 75%); Corporate Debt (up to 100%); Government Securities (up to 100%); and Alternate Asset (up to 5%), allowing for different equity allocations and fund distributions across various asset classes.
 
Upon the child turning 18, the NPS Vatsalya account automatically converts to a regular NPS account. Withdrawal guidelines are being finalized, but the scheme allows for partial withdrawals after a three-year lock-in period for specific reasons such as education or health issues. At age 18, if the invested amount exceeds Rs2.5 lakh, 80% is used to purchase an annuity, while the remaining 20% can be taken as a lump sum payment.
 
Finance Minister Sitharaman highlighted the competitive returns generated by NPS, with 14%, 9.1%, and 8.8% returns for investments in equity, corporate debt, and G-Secs, respectively. The NPS Vatsalya scheme aims to provide parents with a long-term savings option for their children's future, combining the benefits of pension planning with potential market-linked returns.
 
Dear Investor,
In case of any grievance / complaint :
  • Please contact Compliance Officer Shraddha Mhatre at [email protected] and Phone No. - 91-22-35131664.
  • You may also approach CEO Debashis Basu at email- id [email protected] and Phone No. - 91-22-35131664.