Winning Bizness Desk

Mumbai. Union Finance Minister Nirmala Sitharaman officially launched the NPS ‘Vatsalya’ scheme today (September 18) in Delhi. Announced earlier during the 2024 Budget, this new scheme is designed to provide financial security for children as they grow into adulthood. Through NPS Vatsalya, parents and guardians can invest on behalf of their children, ensuring a secure financial future. Once the child reaches adulthood, the account will convert into a regular National Pension Scheme (NPS) account, allowing them to manage it independently. At the launch event, Finance Minister Sitharaman emphasized the importance of investing in NPS Vatsalya, urging parents to consider contributing to this scheme on special occasions such as their child’s birthdays. She highlighted that NPS Vatsalya would help instill the habit of financial planning and saving from an early age.

NPS Vatsalya: Creating a Secure Financial Future

The NPS Vatsalya scheme allows parents to open an investment account for children up to 18 years of age. The account will be in the child’s name, but parents will make contributions until the child reaches adulthood. Upon turning 18, the account will automatically shift to the standard NPS, with the child as the sole beneficiary. The regular NPS scheme is a well-known tool for building a retirement fund, with contributions invested in market-linked instruments such as stocks and bonds for potentially higher returns. Similarly, NPS Vatsalya promotes long-term financial planning, encouraging families to start early savings for their child’s future. Parents or guardians, whether Indian citizens, NRIs, or OCIs, can open an NPS Vatsalya account through Points of Presence (POP) across banks, post offices, and pension funds in the country. The account can also be easily opened online via the e-NPS platform.

Investment Details and Benefits

To open an NPS Vatsalya account, parents need to deposit a minimum of Rs 1,000. While there is no upper limit on investments, the scheme allows partial withdrawals after a lock-in period of three years. Up to 25% of the total deposit amount can be withdrawn for purposes such as education or medical expenses. However, withdrawals are limited to three times until the child turns 18. Once the child reaches adulthood, the account will be converted to NPS Tier-1, where standard rules for NPS accounts will apply. Exiting the scheme before the child turns 18 is not permitted.

A Long-Term Investment Opportunity

NPS Vatsalya offers a compelling opportunity for parents looking to invest in their child's future. For example, if a parent starts contributing Rs 10,000 monthly when their child is three years old, a fund of approximately Rs 63 lakh can be accumulated by the time the child turns 18, ensuring a secure financial base for further education or other needs. With this scheme, the government aims to help parents secure their children's financial future while promoting disciplined saving and investment practices from an early age.