On 17 September 2024, Union Finance Minister Nirmala Sitharaman launched the NPS Vatsalya scheme in New Delhi, a new initiative aimed at securing the financial future of minors. The scheme, which allows parents to invest in pension accounts for their children, was launched simultaneously across 75 locations in India through video conferencing. During the event, the Finance Minister also distributed Permanent Retirement Account Number (PRAN) cards to new minor subscribers.
Key Details of NPS Vatsalya Scheme
The NPS Vatsalya scheme is designed to help parents save for their children’s future by investing in a National Pension System (NPS) account. It allows parents to make flexible contributions starting at Rs 1,000 per year in the name of the child, making it accessible to families from all economic backgrounds. The scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
The Tier-II NPS account will be opened in the child’s name, offering parents the opportunity to ensure long-term financial stability for their children through the power of compounding. Once the subscriber reaches 18 years of age, they have the option to convert the account to an NPS Tier-I account or withdraw the full amount if it is less than Rs 2.5 lakh.
Background of the NPS Vatsalya Scheme
The launch of NPS Vatsalya was announced earlier this year by the Finance Minister in her 2024-25 Union Budget speech. The aim of this scheme is to encourage early investment in children’s futures, providing financial security and independence for future generations. This marks an important step in India’s pension system, ensuring long-term wealth creation for young citizens.
Contribution, Withdrawal, and Benefits
Under the NPS Vatsalya scheme, the minimum contribution is Rs 1,000 annually. After a lock-in period of three years, subscribers can withdraw 25% of the corpus for specific needs such as education, specified illness, or disability. The scheme also offers partial withdrawal up to three times during its term.
The funds are managed by a Pension Fund Manager approved by the PFRDA, and the returns depend on the performance of investments in the market. This makes it an attractive option for parents looking to secure their children’s financial future.
Impact of NPS Vatsalya
The launch of NPS Vatsalya is part of the Government of India’s broader push towards promoting long-term financial planning and security for all. This scheme is expected to benefit families from various economic backgrounds and increase awareness about the importance of financial literacy from an early age.
On a national level, it reinforces the government’s commitment to ensuring a financially secure future for India’s younger generation. Globally, this move reflects India’s efforts to build a strong and resilient pension system, further aligning with global best practices in financial planning.
Aims of the NPS Vatsalya Scheme
The primary goal of NPS Vatsalya is to create a framework where parents can easily contribute to their children’s future savings. The scheme aims to:
- Secure long-term financial stability for minors.
- Promote early savings habits among parents and children.
- Offer flexible investment options for families across economic backgrounds.
- Encourage financial literacy and independence for future generations.
Key Summary of NPS Vatsalya Scheme
- Launch Date: 17 September 2024.
- NPS Vatsalya Scheme: A pension savings scheme for minors under 18.
- PRAN Cards Distributed: Permanent Retirement Account Numbers given to new minor subscribers.
- Minimum Contribution: Rs 1,000 per year with flexible investment options.
- Lock-in Period: Three years with partial withdrawal allowed for education and health.
- PFRDA Regulation: The scheme is managed by the Pension Fund Regulatory and Development Authority.
Read Other Govt. Scheme Details
It is a pension savings scheme for minors, allowing parents to invest in a pension account for their child’s future.
Parents of minors under 18 years of age who are residents of India.
The minimum annual contribution is Rs 1,000.
After three years, up to 25% can be withdrawn for education or medical needs.
The subscriber can convert to an NPS Tier-I account or withdraw the entire corpus if it is less than Rs 2.5 lakh.
