NPS Vatsalya calculator: NPS Vatsalya is the recent addition to the range of pension schemes introduced by the NDA government under the leadership of Prime Minister Narendra Modi. The newest scheme represents a significant stride towards ensuring social security coverage for all citizens and empowers individuals to leverage the potential of compounding, allowing them to steadily build a significant corpus of wealth over a period of time.
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NPS Vatsalya, a scheme akin to the National Pension System (NPS), falls under the purview of the Pension Fund Regulatory and Development Authority (PFRDA). Designed specifically for minors and children, this scheme allows parents to start investing for their minor kids as early as when they are infants. They have an option to discontinue participation once the child attains the age of 18.
The main objective is to create a portfolio for their children with a long-term perspective. Under NPS Vatsalya, parents have the option to contribute a minimum of Rs 1,000 annually in their children’s names. The contributions are not subject to a maximum cap. Upon reaching the age of majority (18 years), the minor children’s accounts will seamlessly transition into regular NPS accounts.
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Like with traditional NPS accounts, guardians can select from different NPS pension fund managers and decide between an active or auto choice for investments. The maximum allocation to equities, which is a high-risk asset class renowned for its potential to generate substantial returns over time, is capped at 75%.
Of significance is that upon maturation, a stipulated minimum of 80% of the accumulated sum must be employed to procure an annuity scheme, with the remainder of 20% being accessible as a lump sum withdrawal.
NPS Vatsalya calculator
If one invests Rs 10,000 per year in NPS Vatsalya for his or her child, that is less than Rs 1,000 per month, then the minor can get Rs 11.05 crore when he is 60 years.
A post by Press Information Bureau in Chandigarh on social media platform X (previously Twitter) showed that an annual contribution of Rs 10,000 can give:
> Annual Contribution: Rs 10,000
> Investment Duration: 18 years
> Expected Corpus at 18: Rs 5 lakh @10% rate of return (RoR)
> Expected Corpus at 60:
> @10% RoR: Rs 2.75 crore
> @11.59%* RoR: Rs 5.97 crore
> @12.86%# RoR: Rs 11.05 crore
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NPS Vatsalya structure
Based on the NPS model, National Pension System (NPS) Vatsalya is expected to provide similar returns. NPS funds have demonstrated lucrative returns since their inception. Specifically, for the private sector NPS since 2009, the returns have been impressive.
In the government sector, a commendable 9.5 percent Compounded Annual Growth Rate (CAGR) has been achieved.
In the voluntary non-government sector, which includes the all-citizens-model and corporate model, equity funds have delivered a remarkable 14 percent CAGR from the beginning. Meanwhile, corporate debt and government securities have yielded returns of 9.1 percent and 8.8 percent respectively. These statistics showcase the promising performance of NPS funds across different sectors.
NPS Vatsalya investment structure is as follows:
• Active Choice: Tailor your investment mix
• Auto Choice LC-75 (Aggressive): High risk, high return
• Auto Choice LC-50 (Moderate): Balanced approach
• Auto Choice LC-25 (Conservative): Low risk, stable returns.
NPS Vatsalya withdrawal
Withdrawals from the NPS Vatsalya scheme can be requested before the child attains 18 years of age, provided that specific conditions are met. Upon completing three years of enrollment, account holders are eligible to withdraw up to 25% of the total contributed amount, with this option available three times until the child reaches the age of majority. These withdrawals can be utilized for purposes such as education expenses, specified medical treatments, or in the case of a disability exceeding 75%, aligning with the guidelines set forth by the Pension Fund Regulatory and Development Authority (PFRDA
Upon the child reaching the age of 18, the NPS Vatsalya account automatically transitions into a standard NPS account. It is imperative for subscribers to complete fresh Know Your Customer (KYC) formalities within three months of this transition. In the event that subscribers decide to exit the NPS system, a minimum of 80% of the accumulated corpus must be reinvested into an annuity plan, while the remaining 20% can be withdrawn as a lump sum. It is important to note that if the total corpus is less than Rs 2.5 lakh, account holders have the option to withdraw the entire amount without any restrictions.
As per the NPS Trust website: NPS Vatsalya will have:
> Seamless shift to NPS Tier – I (All Citizen)
> Fresh KYC of the minor within three months from date of attainting 18 years.
> Upon transitioning, the features, benefits, and exit norms of the NPS-Tier I for All Citizen Model will apply.
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📊 Your Pension Potential with #NPSVATSALYA
— PIB in Chandigarh (@PIBChandigarh) September 18, 2024
• Annual Contribution: ₹10,000
• Investment Duration: 18 years
• Expected Corpus at 18: ₹5 lakh @10% RoR
Expected Corpus at 60:@10% RoR: ₹2.75 Cr@11.59%* RoR: ₹5.97 Cr@12.86%# RoR: ₹11.05 Cr
Start your investment today! pic.twitter.com/S7pt00MuT2
