The highly anticipated NPS Vatsalya scheme, designed to secure the financial futures of minors, is set to be launched within the next two weeks. The government and the Pension Fund Regulatory & Development Authority (PFRDA) are finalising the details of this initiative, aimed at helping parents build long-term wealth for their children.
The launch will be officiated by Finance Minister Nirmala Sitharaman, aligning with the government’s vision of promoting financial inclusion across generations.
NPS Vatsalya was first announced in the 2024-25 Budget and is expected to be a transformational tool for Indian families, encouraging early and consistent saving.
What is NPS Vatsalya?
NPS Vatsalya is a modified version of the National Pension System (NPS) tailored for minors. It allows parents or guardians to open an NPS account for their children and make regular contributions until the child turns 18.
Upon reaching adulthood, the account will seamlessly convert into a regular NPS account, enabling the beneficiary to manage their savings independently.
The scheme is expected to offer the same diverse investment options as the traditional NPS, including a mix of equities, government securities, and corporate bonds.
Subscribers can choose either an automatic investment option, which adjusts based on the account holder’s age, or an active choice, allowing them to manage investments manually.
A key feature of the scheme is its potential for long-term wealth creation, leveraging the benefits of compounding. This could help families build a substantial financial corpus, not only for retirement but also for significant life milestones, such as education.
Partial withdrawals are expected to be allowed after three years, capped at 25% of the contributions, for specific purposes such as education or medical needs.
When the minor turns 18, they can choose to exit the scheme, with 80% of the funds likely required to be invested in an annuity, while the remaining 20% can be withdrawn as a lump sum.
Boosting financial literacy
In addition to wealth creation, NPS Vatsalya aims to promote financial literacy by introducing minors to disciplined savings and investment habits.
By engaging children and their families in financial planning early on, the scheme offers a solid foundation in long-term wealth management.
As of August 2024, NPS assets under management have grown significantly, reaching Rs 13 lakh crore.
NPS Vatsalya builds on this success, providing a dedicated savings tool for minors and furthering the government’s commitment to financial security across generations.
With its official launch imminent, NPS Vatsalya is poised to become a key component of India’s financial landscape, helping families secure brighter futures for their children.
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