Today, Union Finance Minister Smt. Nirmala Sitharaman officially launched NPS Vatsalya in New Delhi. She had previously announced this new scheme during her 2024 budget speech.
NPS Vatsalya is a special program under the National Pension System (NPS) designed specifically for children in India. Let’s explore what this scheme is all about.
Understanding NPS Vatsalya
NPS Vatsalya is an optional scheme that allows parents to save for their children’s future by investing in a pension account and ensure long-term wealth with the power of compounding.
Key Features of NPS Vatsalya
- Eligibility:
- All minor citizens (age till 18 years) are eligible to open account under this scheme.
- Flexibility:
- Guardian has the flexibility to choose the investment options within NPS Vatsalya, allowing him/her to tailor NPS investments based on your risk appetite and financial goals. Like regular NPS account, this scheme also offers 4 investmention options of Equity, Corporate Debt, Government Debt, and Alternate Asset. In Equity maximum of 75% can be allocated where as in Corporate Debt and Government Securities upto 100% allocation can be done. Up to 5% can also be allocated to Alternate Asset .
- Investment Choice:
- Like regular NPS investment can be done in Auto Choice or Active Choice. In Auto Choice, guardian can choose between 3 Lifecycle Fund - Aggressive -LC-75(75% equity), Moderate LC-50 (50% equity) or Conservative-LC-25 (25% equity) as per his/her risk appetite. In case guardian is not sure which choice to select, default choice is set to Moderate Life Cycle Fund -LC-50(50% equity).
- In Active Choice, guardian can actively decide allocation of funds across Equity (upto 75%), Corporate Debt (upto 100%) , Government Securities (upto 100%) and Alternate Asset (5%).
- Minimum Contribution:
- When guardian open an NPS Vatsalya account, guardian need to invest at least ₹1,000 per year. Subsequent contributions can be at least ₹1,000 or more. There’s no limit on how much one can invest.
- Pension Fund Selection:
- Guardian can choose any one of the Pension Fund registered with PFRDA. At present there are 11 pension fund managers available under NPS as listed below:
- SBI Pension Funds Pvt Ltd
- LIC Pension Fund Ltd
- UTI Pension Fund Limited
- HDFC Pension Management Co. Ltd
- ICICI Prudential Pension Fund Management Co. Ltd
- Kotak Mahindra Pension Fund Ltd
- Aditya Birla Sunlife Pension Management Ltd
- Tata Pension Management Private Limited
- Max Life Pension Fund Management Ltd
- Axis Pension Fund Management Ltd
- DSP Pension Fund Managers Private Limited
- Retirement Benefits:
- On retirement, you can withdraw a portion of your accumulated corpus as a lump sum and invest the remaining amount in an annuity plan to receive a regular pension.
- Exit/Withdrawal Option before 18 Years of age:
- Guardian can withdraw up to 25% of the money put into the account after 3 years. This can be done for Education, Illness, or Disability of child. Withdrawl can be done a maximum of 3 times until child turn 18 years old.
How to Join NPS Vatsalya
Joining NPS Vatsalya is a simple process. You can:
- Online: The NPS for Minor account can be opened through Point of Presence(POPs) registered with PFRDA either online or physical mode, which include major banks, India Post, Pension Fund etc.
- Contact Us: Get in touch with Meta Investment to open NPS Vatsalya account for your minor child.
Document Required
- KYC Documents of Guardian
- PAN Card of Guardian or Form 60 Declaration
- Date of Birth proof of minor such as Birth certificate, School leaving certificate, PAN, passport.
- If the guardian is NRI, then NRE/NRO Bank account (solo or joint) of minor.
When Minor turns Major
When the child turns 18 years old, their NPS Vatsalya account will automatically change to a regular NPS account (NPS Tier I).
Within 3 months of turning 18, they’ll need to provide some basic information to update their account KYC.
After this change, the rules and benefits for regular NPS accounts will apply to their account.
Would you like to know more about specific aspects of NPS Vatsalya, such as investment options or tax implications? Connect with us today
