GUWAHATI: Finance Minister Nirmala Sitharaman on Wednesday, September 18, introduced the NPS Vatsalya scheme, designed to help parents save for their children’s future through a pension account.
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Parents can sign up for NPS Vatsalya either online or by visiting banks or post offices. The scheme requires an initial minimum deposit of ₹1,000 to open the account, followed by an annual contribution of at least ₹1,000. Withdrawal guidelines are currently being finalised. Sitharaman highlighted that NPS has consistently delivered competitive returns, providing a secure option for long-term savings and future income.
NPS Vatsalya is an extension of the National Pension Scheme (NPS) tailored for minors, allowing parents to create pension accounts for their children under 18. The scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), and minor subscribers will be issued a Permanent
Retirement Account Number (PRAN) card. NPS currently serves 1.86 crore subscribers with an Asset Under Management (AUM) of ₹13 lakh crore. When the child turns 18, the account will automatically convert to a regular NPS account, and pension payments will only begin after they reach 60. Sitharaman also noted that NPS has delivered 14% returns on equity investments, 9.1% on corporate debt, and 8.8% on government securities.
Eligibility criteria for the scheme include the child being under 18 and both the child and parent/guardian being Indian citizens. Compliance with Know Your Customer (KYC) requirements is mandatory.
The NPS Vatsalya account can be opened through Points of Presence (PoPs) such as major banks, India Post, and Pension Funds. Parents or guardians must provide identification documents for both themselves and the child to open an account. After the initial ₹1,000 contribution, families can choose how often they wish to contribute.
The scheme offers three investment choices:
1. Default Choice: Moderate Life Cycle Fund (LC-50), with 50% equity allocation.
2. Auto Choice: Guardians can select from three lifecycle funds — Aggressive (LC-75 with 75% equity), Moderate (LC-50 with 50% equity), or Conservative (LC-25 with 25% equity).
3. Active Choice: Guardians can actively allocate funds across equity (up to 75%), corporate debt (up to 100%), government securities (up to 100%), and alternate assets (up to 5%).
After a three-year lock-in period, up to three withdrawals, capped at 25% of contributions, are permitted for specific needs such as education, illness, or disability.
Upon turning 18, the NPS Vatsalya account automatically transitions into a regular NPS account. If the account holds over ₹2.5 lakh at that age, 80% of the amount will be used to purchase an annuity, while the remaining 20% can be withdrawn as a lump sum. If the total is ₹2.5 lakh or less, the entire amount can be withdrawn as a lump sum.
In the event of the account holder's death, the entire amount will be returned to the appointed guardian.