Union Finance Minister Nirmala Sitharaman has introduced a new pension scheme for minors called “NPS Vatsalya.”  Along with this, an online platform for subscribing to NPS Vatsalya has been launched, and PRAN cards were issued to the first registered minor subscribers. The Pension Fund Regulatory and Development Authority (PFRDA) will manage the scheme.

What is NPS Vatsalya?

NPS Vatsalya is a savings-cum-pension scheme designed for minors. It allows parents to invest in their children’s future by contributing to a pension account. The scheme offers flexible investment options starting at a minimum of Rs 1,000/- per year, making it accessible to families from various economic backgrounds.

Withdrawals and Exit Rules

• Withdrawals: Up to 25% of the contribution can be withdrawn after a 3-year lock-in period for education, illness, or disability. This is allowed up to three times.
• Exit at 18 years: Once the child turns 18, they can transition to a regular NPS account (Tier-I).
•  For a corpus above Rs 2.5 lakh, 80% is used to buy an annuity, and 20% can be withdrawn as a lump sum.
•  For a corpus below Rs 2.5 lakh, the entire amount can be withdrawn.
• In case of death: The full corpus will be returned to the guardian.

Key Features

• Eligibility: Any minor under 18 years of age is eligible.
• Guardian Operated: The account is opened in the minor's name and operated by the guardian.
•  Investment Options: Guardians can choose between different funds registered with PFRDA, with both automatic and active choices available for fund allocation.

How to Open NPS Vatsalya Account

NPS Vatsalya accounts can be opened through banks, India Post, and pension funds, as well as the online platform “e-NPS.” ICICI Bank has also launched NPS Vatsalya at its business centers nationwide, offering a streamlined process for customers.

Documents Needed

• Guardian’s KYC (Proof of Identity and Address)
• Date of Birth proof of the minor
•  NRE/NRO Bank Account details if the guardian is an NRI

This initiative aims to secure a child’s financial future by starting early, leveraging the power of long-term investment and compounding.

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