What is NPS Vatsalya Scheme?

December 6, 2024

The National Pension Scheme (NPS) Vatsalya was launched in September 2024, which allows parents to invest in a pension plan for their children. It targets Indian children under 18 years of age. The Pension Fund Regulatory and Development Authority (PFRDA) manages the scheme, which offers an attractive interest rate of 9.5% to 10%. This makes it a viable option for securing a financial future for children.

Eligibility Criteria

Any Indian child under 18 can join the NPS Vatsalya scheme. The account is registered in the child’s name. A parent or guardian manages the account. The child is the sole beneficiary of the funds.

Required Documentation

To open an account, specific documents are necessary. You need the child’s proof of birth, such as a birth certificate. The guardian must provide ID and address proof, like an Aadhaar or a Passport. The guardian’s PAN or Form 60 declaration is also required. For NRIs or OCIs, a special NRE/NRO bank account is essential.

A minimum deposit of ₹1,000 is required to start the account and annual contributions must also be at least ₹1,000. There is no upper limit on contributions.

Withdrawals and Emergencies

Partial withdrawals are permitted for emergencies. These include education, medical treatment, or disability (over 75%). Up to 25% of contributions can be withdrawn after three years. Withdrawals can occur up to three times before the child turns 18.

Funds in the account are invested in various assets. Choices include equity shares, corporate bonds, and government securities. These investments follow guidelines set by the PFRDA.

Account Closure and Annuity

The account can be closed when the child turns 18. At that time, at least 80% of savings must be used to purchase an annuity. This provides regular payments. The remaining 20% can be withdrawn as a lump sum. If the total amount is ₹2.5 lakh or less, the entire amount can be withdrawn at once if annuities are unavailable.

GKToday Facts for Exams:
NPS Vatsalya: Launched in September 2024, this pension scheme allows guardians to invest for Indian children under 18. It promotes financial literacy and long-term savings for a secure future.
PFRDA: The Pension Fund Regulatory and Development Authority oversees the NPS Vatsalya scheme. It regulates pension funds in India, ensuring safety and growth of investments for beneficiaries.
NRE/NRO Accounts: Non-Resident External and Non-Resident Ordinary accounts cater to NRIs and OCIs. These special bank accounts facilitate foreign investments and currency management for Indian expatriates.
Annuity: An annuity is a financial product offering regular payments. In NPS Vatsalya, at least 80% of savings must be used to purchase one after the child turns 18.

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