NPS Vatsalya Scheme: How to invest, withdraw money? | Know benefits, eligibility criteria and more details
NPS Vatsalya Scheme: Through the NPS Vatsalya Yojana, parents can invest on behalf of their children until they reach the age of 18. The primary goal of the scheme is to build a financial corpus for the children over the long term, supporting their future needs and goals.
NPS Vatsalya Scheme: Union Finance Minister Nirmala Sitharaman on September 19 launched the National Pension System Vatsalya (NPS Vatsalya) scheme, ‘a pension scheme for minors’. The NPS Vatsalya was announced by the government in the Union Budget 2024-25.
Sitharaman also released a brochure, detailing the features of the NPS Vatsalya scheme and also distributed permanent retirement account number (PRAN) cards to minor subscribers who had come from different parts of the country.
What is NPS Vatsalya?
The NPS Vatsalya Yojana is a pension scheme designed for children, allowing parents to open pension accounts on behalf of their children and invest for their future. Contributions to this scheme benefit from compound interest. An account can be opened with a minimum annual contribution of Rs 1000, with no maximum limit on investment.
NPS Vatsalya will allow parents to save for their children’s future by investing in a pension account and ensure long-term wealth with the power of compounding. NPS Vatsalya offers flexible contributions and investment options, allowing parents to make investment of Rs 1,000 annually in the name of the child, thus making it accessible to families from all economic backgrounds.
This new initiative is designed to start early in securing the financial future of children, marking an important step in India’s pension system. The Scheme will be run under the Pension Fund Regulatory and Development Authority (PFRDA).
Eligibility for NPS Vatsalya
- All minor citizens (age below 18 years).
- Account can be opened in the name of minor and operated by parent or guardian. Minor will be the beneficiary.
- Scheme can be opened through various Points of presence regulated by PFRDA such as major banks, India Post, Pension Funds and Online platform (e-NPS).
- Subscriber to make a minimum contribution of Rs 1000/- per annum. There is no limit on the maximum contribution.
- PFRDA will provide multiple investment choices to subscribers. Subscribers can take exposure in government securities, corporate debt, and equity in different proportions based on risk appetite and desired returns.
- On attaining the age of majority, the plan can be converted seamlessly into a normal NPS account.
Rules to withdraw money from NPS Vatsalya
- The NPS Vatsalya Yojana has a lock-in period of 3 years. After this period, if the child is under 18, up to 25 per cent of the total contributions can be withdrawn for purposes such as education, illness, or disability, with a maximum of three withdrawals allowed.
- Once the child turns 18, their NPS Vatsalya account will be transferred to a regular NPS account. The child may choose to continue the NPS account, but must complete KYC within three months of turning 18. After this age, at least 80 per cent of the total amount in the account must be allocated to an annuity plan, with the remaining 20% available for lump sum withdrawal. If the total amount in the account is Rs 2.5 lakh or less after 18 years, the entire amount can be withdrawn in a lump sum.
In case of death
If the child account holder dies, all the money deposited in the account in his/her name will be returned to the parent (nominee). If either of the parents dies, another guardian will be registered through a fresh KYC. If both the parents die, any legal guardian can continue the account without making any contribution until the child turns 18 years old.
Where to open an account
Under the NPS Vatsalya scheme for a child, an account can be opened through a bank, post office, online platform or e-NPS. Apart from this, you can also open an NPS Vatsalya account for your child by visiting this website https://app.camsnps.com/CRA/auth/enps/register?source=eNPS
Options available for investment
Parents can choose any pension fund for their child, which is registered with PFRDA. There are many options available for investment under this scheme:
- Active Choice: In this option, parents can invest up to 75% of funds in equity, up to 100% in corporate debt, up to 100% in government bonds or up to 5% in other assets.
- Auto Choice: In this option, parents can invest the amount to be invested in different life cycles i.e. LC as per their wish. In this, parents can choose LC-75 (Aggressive), in which 75% of the amount will go to equity. In LC-50 (Moderate), 50% and in LC-25 (Conservative), 25% of the amount will go to equity.
- Default Choice: In this option, 50% of the amount to be invested will go to equity.
Also Read: US Fed cuts interest rates by 50 basis points, first reduction since 2020
Also Read: Refund cap for Sahara Group depositors increased to Rs 50,000 from Rs 10,000: Govt