Union Minister for Finance and Corporate Affairs Nirmala Sitharaman recently launched the National Pension System Vatsalya (NPS Vatsalya) scheme, ‘a pension scheme for minors’. The NPS Vatsalya was announced in the Union Budget 2024-25 on July 23, 2024.
Sitharaman also launched an online platform for subscribing to NPS Vatsalya and released the scheme brochure.
NPS Vatsalya is an extension of the already existing NPS to children. In the last 10 years, NPS has 1.86 crore subscribers with an Asset Under Management (AUM) of Rs 13 lakh crore.
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Eligibility for NPS Vatsalya is as follows:
- All minor citizens (age below 18 years).
- The account can be opened in the name of a minor and operated by a parent or guardian. Minor will be the beneficiary.
- The scheme can be opened through various Points of Presence regulated by PFRDA such as major banks, India Post, Pension Funds and Online platform (e-NPS).
- Subscriber to make a minimum contribution of Rs 1000/- per annum. There is no limit on the maximum contribution.
- PFRDA will provide multiple investment choices to subscribers. Subscribers can take exposure to government securities, corporate debt, and equity in different proportions based on risk appetite and desired returns.
What Happens Once a Minor Turns 18 and Above?
On attaining the age of majority, the plan can be converted seamlessly into a normal NPS account.
Upon Attainment of Age of 18 Years
Children below the age of 18 years can open an NPS Vatsalya account, which will automatically get converted to a regular NPS account upon completion of 18 years of age. Pension will come from the account only upon attainment of 60 years of age.
–Seamless shift to NPS Tier – I (All Citizen)
–Fresh KYC of the minor within three months from the date of attaining 18 years.
–Upon transitioning, the features, benefits, and exit norms of the NPS-Tier I for All Citizen Model will apply
Kurian Jose, CEO, Tata Pension Management, explained that upon attainment of the age of 18 years, this account can be shifted seamlessly to NPS Tier – I (All Citizen).
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“All features of investing through Auto Choice / Active Choice can be utilised for the same as well. By encouraging early investment and providing a structured savings plan, NPS Vatsalya aims to build a robust financial foundation for young individuals. This innovative approach not only ensures that children receive the benefits of disciplined saving and compounding over time but also fosters a sense of financial responsibility from an early age,” Jose said.
