NPS Vatsalya Pension Scheme Explained: How It Aims To Secure The Future For Children. Details Inside

NPS Vatsalya scheme: The scheme is set to foster a culture of savings from an early age, ensuring long-term financial security for India's younger generation

NPS Vatsalya Scheme: Finance Minister Nirmala Sitharaman at the launch of the scheme, in New Delhi.

Source : PTI

NPS Vatsalya scheme: In a major initiative to secure the financial future of children in India, the Centre has introduced the NPS Vatsalya Pension Scheme, providing flexible contributions and investment options for parents or guardians. The scheme, announced in the Union Budget 2024-25, is aimed exclusively at minors, marking a progressive step in financial planning for young citizens.

The National Pension System Vatsalya (NPS Vatsalya) scheme is set to foster a culture of savings from an early age, ensuring long-term financial security for India's younger generation.

Key Features of the NPS Vatsalya Scheme

The NPS Vatsalya is a saving-cum-pension scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Under the scheme, parents or guardians can invest a minimum of Rs 1,000 per month with no upper limit.

The scheme allows guardians to manage the account until the child turns 18, at which point the account transitions into the child's name. It can then be converted into a regular NPS account or any other non-NPS investment scheme.

A key feature of NPS Vatsalya is its flexibility, offering guardians the choice of multiple investment funds. The Moderate Life Cycle Fund (LC-50), which allocates 50 per cent of investments to equity, is the default option.

Additionally, there are three auto-choice options based on risk preferences:

• Aggressive LC-75 (75 per cent equity)
• Moderate LC-50 (50 per cent equity)
• Conservative LC-25 (25 per cent equity)

For those opting for the Active Choice option, parents can tailor the portfolio with up to 75 per cent in equity, 100 per cent in corporate debt, 100 per cent in government securities, and 5 per cent in alternate assets, depending on their financial goals.

Enrolment and Documentation

The NPS Vatsalya account is available to all minors under 18 and is managed by their guardians. Accounts can be opened through registered Points of Presence (PoPs) such as major banks, India Post, and pension funds, or online via the NPS Trust's eNPS platform.

Required documents include proof of the child’s date of birth (birth certificate, school certificate, etc.) and the guardian’s identity and address proof (Aadhaar, passport, Voter ID, etc.). Non-resident Indian (NRI) or Overseas Citizen of India (OCI) guardians must provide an NRE/NRO account.

Transition at 18

Once the child reaches 18, the NPS Vatsalya account will automatically transition to an NPS Tier-I (all-citizen) model. The account holder must complete a fresh Know Your Customer (KYC) process within three months of turning 18 to continue benefiting from the scheme's provisions.

This innovative pension scheme is expected to encourage long-term savings, enhance financial planning for minors, and set a foundation for secure futures across generations.

Who can operate this scheme?

Parents, guardians, NRIs, and OCIs can open NPS Vatsalya accounts on behalf of minors, helping to kickstart early retirement savings. "One of the key benefits of this scheme is the power of compounding, which significantly boosts returns over time," Finance Minister Nirmala Sitharaman noted earlier. The scheme requires a minimum contribution of Rs 500 per month or Rs 6,000 annually.