Image Source : PTI Union Finance Minister Nirmala Sitharaman with a child during the launch of NPS Vatsalya Scheme
NPS Vatsalya scheme: The NPS Vatsalya announced by the Central government has received a positive response from the people as about 9,700 minor subscribers joined the scheme on the first day of its launch. The scheme, launched this week, is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The scheme offers parents and guardians an opportunity to start saving early for their children’s retirement by using the power of interest on interest.
NPS Vatsalya is a unique scheme in India’s emerging pension landscape. Finance Minister Nirmala Sitharaman officially launched the NPS Vatsalya scheme on September 18. It was announced in the Union Budget 2024-25. PFRDA said in a statement on Friday that NPS Vatsalya received a good response on the first day of the offer. 9,705 minor subscribers joined the scheme through various Points of Presence (POPs) and the e-NPS portal. Out of this, 2,197 accounts were opened through the e-NPS portal. There are 3 options for investment here
Options to invest in NPS Vatsalya
Parents can choose any pension fund for their child, which is registered with PFRDA. There are 3 options available for investment under this scheme-
Active Choice: In this option, parents can invest funds up to 75% in equity or up to 100% in corporate debt or 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 as per their wish in different life cycles i.e. LC. In this, parents can choose LC-75 (Aggressive), in which 75% amount will go to equity. In LC-50 (Moderate), 50% and in LC-25 (Conservative), 25% amount will go to equity.
Default Choice: In this option, 50% of the amount to be invested will go to equity.
Details about NPS Vatsalya scheme
In this NPS Vatsalya scheme, an account can be opened in the name of the child with a minimum of Rs 10,000 per annum. There is no maximum investment limit. This scheme comes with a stipulated period of 3 years. After that period is over, if the child is below 18 years of age, up to 25% of the total contribution can be withdrawn in circumstances like his education, illness and disability. In this way, money can be withdrawn maximum by 3 times. This account can be opened through bank, post office, online platform or e-NPS.
After completion of 18 years of age, the child’s NPS Vatsalya account can be converted into a regular NPS account. Then, the child can continue his NPS account if he wants. After 18 years, at least 80% of the total amount deposited in the account will go to the annuity plan and the remaining 20 percent amount can be withdrawn in lump sum.
So, in this way, if parents contribute Rs 10,000 annually to their child’s NPS Vatsalya account for 18 years, a fund of Rs 5 lakh will be accumulated at an estimated return of 10%. If this investment continues till the investor turns 60 years of age, a fund of Rs 2.75 crore will be accumulated based on a 10% return.
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