All You Need To Know About NPS Vatsalya Yojana

The government has launched a new scheme under the National Pension System (NPS) aimed at financially securing the future of children. The NPS Vatsalya scheme, announced in the Union Budget 2024 in July, was launched by Finance Minister Nirmala Sitharaman on September 18. The pension scheme will be managed under the Pension Fund Regulatory and Development Authority (PFRDA). The scheme allows parents and legal guardians to invest to build a retirement corpus for their children from their childhood up to the age of 18 years.  

1) How to open an NPS Vatsalya account?

Opening an NPS Vatsalya account is easy and can be done either online or at designated Points of Presence (POPs) like India Post and banks. How to open the account online:

•  Visit the eNPS website.
•  From the National Pension System (NPS) dropdown list, click on 'NPS Vatsalya (Minors)' menu and under that 'Register Now.'
•  Enter the guardian's details - date of birth, PAN number, mobile number and email
• Click 'Begin Registration.'
•  Verify the OTP sent to the guardian's mobile number and email.
• After verification, an acknowledgment number will appear; click 'Continue'
• Fill in the minor's and guardian's details, upload the necessary documents and click 'Confirm.'
• Make the initial contribution of Rs 1,000.
•  Your PRAN will be generated, and the NPS Vatsalya account will be opened in the minor's name.

To open the NPS Vatsalya account through Points of Presence registered with the PFRDA, a complete list of POPs is available on the PFRDA website.

2) Who can open this account?

The NPS Vatsalya Yojana is open to:

• Indian citizens under 18 years.
• Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) below 18 years.
• Parents or guardians who wish to open the account on behalf of their minor children.

3) How does this NPS Vatsalya Yojana work?

The NPS Vatsalya Scheme operates as a savings-cum-pension plan that allows parents to invest in an NPS account for their minor children. Once the child turns 18, the account transitions automatically into a regular NPS Tier I account. By ensuring early investment and structured savings, NPS Vatsalya aims to build a solid financial foundation for young individuals. This scheme not only secures the child's future but also encourages continued participation in the NPS framework.

4) How much money can be deposited minimum?

The minimum annual contribution to an NPS Vatsalya account is Rs 1,000, with no upper limit on the amount that can be deposited.

5) How much money can be withdrawn, when, and what about interest?

The NPS Vatsalya Scheme allows partial withdrawals before the child turns 18 under specific conditions. Parents or guardians can:

• Withdraw up to 25% of the contributed amount.
• Make withdrawals only after the account has been active for 3 years.
• Use the withdrawal option up to three times before the child turns 18.
• Withdraw funds for purposes such as education, treatment of specified illnesses, or disability of more than 75%, as defined by the PFRDA.

The child has the option to exit the NPS Vatsalya account upon reaching adulthood instead of converting it to a regular NPS account.

The withdrawal conditions are as follows:

•  A minimum of 80% of the accumulated amount must be reinvested in an annuity plan, while the remaining 20% can be withdrawn as a lumpsum.
• The entire money can be withdrawn in one lumpsum if the total corpus is less than Rs. 2.5 lakh.
• In the event of death:
• If the minor (subscriber) dies, the entire corpus is given to the guardian (nominee).
• If the guardian dies, a new guardian must be registered through fresh KYC.
• If both parents die, the legal guardian can continue the scheme without further contributions until the child turns 18.

In conclusion, NPS Vatsalya Yojana provides a strong financial safety net for children, blending early investment with long-term benefits.