NPS Vatsalya Scheme: Securing Minors' Financial Future

The NPS Vatsalya scheme, introduced in Budget 2024, aims to financially secure children's futures by encouraging guardians to invest in pension accounts for minors. The scheme is open to Indian citizens and NRIs for their minor children under 18 years old.

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

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