Lagatar24 Desk
New Delhi: The Indian government has launched the NPS Vatsalya Yojana, a new scheme under the National Pension System (NPS) aimed at providing financial security for children. Announced in the Union Budget 2024 and officially launched by Finance Minister Nirmala Sitharaman on September 18, the scheme will be managed by the Pension Fund Regulatory and Development Authority (PFRDA). This scheme allows parents or legal guardians to build a retirement corpus for their children, starting from childhood until they turn 18.
Key Features of NPS Vatsalya Yojana
1. How to Open an NPS Vatsalya Account
Opening an NPS Vatsalya account is straightforward and can be done online or through designated Points of Presence (POPs) such as India Post and banks. The online process includes visiting the eNPS website, selecting the NPS Vatsalya option, and completing the registration using the guardian’s PAN number, mobile number, and email. After completing the verification and initial contribution of ₹1,000, the Permanent Retirement Account Number (PRAN) will be generated.
2. Who Can Open an Account?
The NPS Vatsalya Yojana is open to:
- Indian citizens under 18 years of age.
- Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) below 18 years.
- Parents or guardians who wish to open the account on behalf of their minor children.
3. How the Scheme Works
NPS Vatsalya operates as a savings-cum-pension plan, with parents investing for their children’s future. Once the child turns 18, the account automatically transitions into a regular NPS Tier I account. This ensures early investments with structured savings that secure the child’s financial future while encouraging long-term participation in the NPS.
4. Minimum Contributions
The minimum annual contribution is set at ₹1,000, but there is no upper limit on deposits, allowing for flexible savings options based on individual financial capacities.
5. Withdrawal Conditions and Interest
Parents or guardians can make partial withdrawals under specific circumstances:
- Up to 25% of the contributed amount can be withdrawn after the account has been active for three years.
- Withdrawals are allowed up to three times before the child turns 18, specifically for education, medical treatment, or disabilities exceeding 75%.
Upon reaching adulthood, the child can opt to convert the account into a regular NPS Tier I account or exit the scheme. A minimum of 80% of the accumulated amount must be reinvested in an annuity, while the remaining 20% can be withdrawn as a lump sum.
If the total corpus is less than ₹2.5 lakh, the entire amount can be withdrawn as a lump sum.
6. In the Event of Death
- If the minor (subscriber) dies, the entire corpus is handed over to the guardian (nominee).
- In the case of the guardian’s death, a new guardian can be registered after completing fresh KYC.
- If both parents pass away, the legal guardian may continue the scheme without additional contributions until the child reaches adulthood.
Conclusion
The NPS Vatsalya Yojana is designed to provide a robust financial safety net for children by blending early investment with long-term benefits. With features like flexible withdrawals, minimal contributions, and a strong pension structure, this scheme is poised to offer financial stability and security to future generations.
