NPS Vatsalya Scheme: Securing Minors' Financial Future

Introduction and Launch

• Finance Minister Nirmala Sitharaman launched NPS Vatsalya on September 18, 2024
• Introduced in Budget 2024 to financially secure children's future
• Launch event held in New Delhi, with 75 locations joining virtually
• Scheme regulated by Pension Fund Regulatory and Development Authority (PFRDA)
• Aims to encourage guardians to invest in pension accounts for minors

Eligibility and Account Details

• Open to Indian citizens and NRIs for their minor children (under 18 years)
• Legal guardians can also open accounts for minors
• Minimum annual contribution of ₹1,000, no upper limit
• NPS Tier-II account opened in the minor's name
• Permanent Retirement Account Number (PRAN) card issued to enrolled children
• Not available for non-resident Indians (NRI) children
• Lock-in period of three years

Investment Options and Potential Returns

• Default choice: Moderate Life Cycle Fund (LC-50) with 50% equity exposure

Auto choice options:

• • Aggressive (LC-75): 75% equity
  • Moderate (LC-50): 50% equity
  • Conservative (LC-25): 25% equity
• Active choice: Customizable allocation with up to 75% equity exposure
• Investment options in corporate debt, government securities, and alternative assets

Potential for substantial wealth accumulation:

• • Example: ₹10,000 annual investment for 18 years
  • Estimated corpus at age 18: ₹5 lakh (10% return)
  • Projected corpus at age 60: ₹2.75 crore (10% return) to ₹11.05 crore (12.86% return)
• Returns not guaranteed, depend on market performance

Maturity, Withdrawal, and Succession Rules

• Account matures when the child turns 18

Options at maturity:

• • Continue investing with fresh KYC within three months
  • Exit NPS: Reinvest 80% in annuity, withdraw 20% as lump sum
  • Full withdrawal if corpus is less than ₹2.5 lakh

Partial withdrawal rules:

• • After 3 years, up to 25% of corpus allowed for specific purposes
  • Maximum of three partial withdrawals before turning 18

Death and succession:

• • If subscriber dies, entire corpus returned to registered nominee (guardian)
  • If guardian dies, new guardian can be appointed with fresh KYC
  • If both parents die, legal guardian can continue or pause contributions until child is 18