The government has launched the NPS Vatsalya Yojana, a pension scheme for minors, announced by Finance Minister Nirmala Sitharaman during the Union Budget 2024. This scheme aims to secure the financial future of children and build wealth over the long term. With a minimum annual contribution of just Rs 1,000, parents can take advantage of compound interest to accumulate significant funds for their children.
What is NPS Vatsalya?NPS Vatsalya is a newly introduced pension scheme targeting minor children. Officially announced in the Union Budget of July 2024, the scheme has been rolled out in 75 locations across India. Over 250 PRANs (Permanent Retirement Account Numbers) have already been issued to minors. Parents can open a pension account for their children under this scheme, benefiting from flexible contribution options and long-term investment growth.
Benefits of the SchemeFinance Minister Sitharaman highlighted that NPS Vatsalya is a milestone in promoting financial security. It provides a safety net for both the young and elderly, fostering a culture of saving among the youth. With compound interest, participants can build substantial capital over time, ensuring a dignified retirement.
Potential Savings with NPS VatsalyaAccording to the Press Information Bureau (PIB) in Chandigarh, the savings potential under NPS Vatsalya is as follows:
Annual Contribution: Rs 10,000
Investment Period: 18 years
Estimated Corpus:
At age 18: Rs 5 lakh (assuming 10% return rate)
At age 60:
10% RoR: Rs 2.75 crore
11.59% RoR: Rs 5.97 crore
12.86% RoR: Rs 11.05 crore
Eligibility: Minors with a PAN card and Aadhaar card, below 18 years of age.
Minimum Contribution: Rs 1,000 annually, with no upper limit on contributions.
Parental Contributions: Parents or guardians can contribute on behalf of their children.
Account Conversion: Once the minor turns 18, the account transitions to a Standard NPS account upon submission of KYC documents.
Partial Withdrawal:
Up to 25% of contributions can be withdrawn after a 3-year lock-in period for education, critical illness, or disability.
Maximum of three partial withdrawals allowed.
Corpus Usage:
For amounts over Rs 2.5 lakh, 80% must be used to purchase an annuity, while 20% can be withdrawn as a lump sum.
For amounts of Rs 2.5 lakh or less, the entire corpus can be withdrawn.
In Case of Death:
The entire corpus will be transferred to the guardian.
As per the NPS Trust website, the following documents are required:
Proof of the minor’s date of birth (Birth Certificate, School Leaving Certificate, Matriculation Certificate, PAN, or Passport).
Guardian’s KYC (Aadhaar, Driving License, Passport, Voter ID, NREGA Job Card, or National Population Register).
NRE/NRO bank account details (single or joint) if the guardian is an NRI.
NPS Vatsalya offers a unique opportunity for parents to secure their children’s financial future with minimal contributions. Its long-term benefits, combined with flexibility and compounding growth, make it an excellent choice for building a robust retirement corpus.
