NPS Vatsalya:Parents have the option to utilize NPS Vatsalya to establish savings for their children's future by opening a pension account and taking advantage of the power of compounding for long-term wealth

NPS Vatsalya: Your child can get more than Rs 10 crore on retirement if you put Rs 10,000 a year till he is 18; how to invest in NPS Vatsalya NPS Vatsalya offers flexible contribution and investment options, allowing parents to contribute Rs. 1,000 annually in the child's name, making it accessible for families from all financial backgrounds

In line with the July Union Budget 2024 announcement, Finance Minister Nirmala Sitharaman unveiled NPS Vatsalya, a pension scheme designed for minors. This initiative was rolled out across 75 locations nationwide, with over 250 PRANs (permanent retirement account numbers) being allocated to young subscribers.

NPS Vatsalya launched: Rules regarding eligibility, investment amount, withdrawals, how to buy online

What is NPS Vatsalya

Parents can use NPS Vatsalya to build savings for their children's future through a pension account and leverage the benefits of compounding for long-term wealth. NPS Vatsalya provides adaptable contribution and investment choices, enabling parents to deposit Rs. 1,000 per year in the child's name, making it feasible for families from all financial situations.

The finance minister emphasized that NPS Vatsalya represents a significant stride in the government's commitment to encouraging long-term financial planning and security for all citizens. In addition to safeguarding subscribers' futures, the scheme is designed on the principle of intergenerational equity, providing coverage for both older and younger family members.

According to Sitharaman, NPS Vatsalya will encourage young subscribers to develop a savings habit, and significant wealth can be built up through the effects of compounding. She emphasized that the scheme would provide a respectable life for individuals in their later years.

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Latest NPS equity returns: Check how your NPS pension fund is performing

NPS Vatsalaya: How much retirement corpus your child can save

"The NPS Vatsalya Scheme has been implemented as a savings-cum-pension scheme which enables parents to invest in an NPS account on behalf of their minor children. The account will be registered in the minor's name and operated by the parent / guardian. One of the key features is that the account can be transitioned to a regular NPS Tier-I account of the child once he / she attains the age of 18. This may help promote the NPS Scheme for the youth and encourage them to continue with the NPS in future. It may also serve as a mechanism for parents / guardians to secure their children's future through regular contributions to the minor's NPS account," says Puneet Gupta, Tax Partner, EY India.

According to the Press Information Bureau in Chandigarh social media handle on X, this how much you can save for your child with NPS Vatsalya:

Annual Contribution: Rs 10,000
Investment Duration: 18 years
Expected Corpus at 18: Rs 5 lakh @10% rate of return (RoR)
Expected Corpus at 60:
@10% RoR: Rs 2.75 crore
@11.59%* RoR: Rs 5.97 crore
@12.86%# RoR: Rs 11.05 crore

— PIBChandigarh (@PIBChandigarh)

Features of NPS Vatsalaya

Key attributes of the Vatsalya NPS account, as per an ICICI Bank press release:

Eligibility criteria: Any minor, having PAN card and Aadhar card, who is under the age of 18 is eligible
Minimum contribution: A minimum of Rs 1,000 per year can be contributed with no limit on maximum contribution
Contributors to the scheme: Parents/guardians can contribute on behalf of their children
Transition after the age of 18: The minor's NPS account will transition to a standard NPS account, post the submission of required KYC documents

According to the Central Bank of India website: "Withdrawal up to 25% of contribution after a lock-in period of 3 years allowed for education, specified illness, and disability. Maximum three times.
Upon attainment of age of 18 years, seamless shift to NPS Tier - I (All Citizen).
Exit allowed on attainment of 18 years of age:
Corpus more than Rs. 2.5 lakh: 80% of the corpus is utilized for the purchase of annuity and 20% can be withdrawn as a lump sum.
Corpus less than or equal to Rs. 2.5 lakh: Entire corpus can be withdrawn as a lump sum.
On death, the entire corpus would be returned to the guardian."

— PIBChandigarh (@PIBChandigarh)

Documents required to open NPS Vatsalaya account

Documents required as per the NPS Trust website:

Date of Birth proof of the Minor (Birth certificate, School leaving certificate/ Matriculation Certificate, PAN and Passport)
KYC of the Guardian shall be carried out by submitting Proof of Identity and Address (Aadhaar, Driving License, Passport, Voter ID card, NREGA Job Card and National Population Register)
NRE / NRO Bank Account (solo or joint) of the minor in case guardian is NRI.

How to invest in NPS Vatsalya

Following the finance minister's launch of the NPS Vatsalya scheme on September 18, 2024, numerous banks introduced the pension plan for minors. Here are a few banks that have launched the NPS Vatsalya scheme.

ICICI Bank

As per an ICICI Bank press release, "To register for NPS Vatsalya, customers can visit their nearest ICICI Bank business centre."

"We have equipped all ICICI Bank business centres across the country to open the NPS Vatsalya account for customers. This account helps in long-term wealth creation, ensuring that by the time the minor becomes an adult, there is a financial corpus in place for them," said Sriram H., Head - Deposit Products, ICICI Bank.

Axis Bank

"At the launch event held in Delhi, Finance Minister Nirmala Sitharaman, presented a symbolic Permanent Retirement Account Number (PRAN) to Ms. Lamba Karnam Aaditri from Hyderabad, who was selected by Axis Bank. As a part of the initiative, Axis Bank opened total 17 NPS Vatsalya accounts and handed over symbolic PRANs to the children. The senior Bank officials Ms. Baishakhi Banerjee - Regional Branch Banking Head, South 1 and Rakesh Bhojnagarwala - Regional Branch Banking Head, West 2 handed over symbolic PRANs and opened NPS Vatslaya accounts for around 16 children in Bangalore and Ahmedabad," according to an Axis Bank press release.

Canara Bank

— canarabank (@canarabank)

Punjab National Bank (PNB)

— pnbindia (@pnbindia)

Central Bank of India

According to the Central Bank of India website here is how you can invest in NPS Vatsalya, "Channel of Subscription/Opening of Accounts: Through all branches; Or Link: https://www.centralbank.net.in/jsp/NPS.html ."

Bank of Maharastra

Click here to invest in NPS Vatsalya: https://bankofmaharashtra.in/nps-vatsalya#:~:

eNPS online platform

The NPS Trust website states, "The online platform (eNPS) is the quickest way to open an NPS Vatsalya account. This system allows you to open an NPS Vatsalya account and make subsequent contributions. You can choose any of the following CRAs:

Protean
KFintech
CAMS NPS"

NPS Vatsalya: Upon attainment of age of 18 years
As per the NPS Trust website:

Seamless shift to NPS Tier - I (All Citizen)
Fresh KYC of the minor within three months from date of attainting 18 years.
Upon transitioning, the features, benefits, and exit norms of the NPS-Tier I for All Citizen Model will apply

This story originally appeared on: India Times - Author:Faqs of Insurances