On Wednesday, September 18th, Finance Minister Nirmala Sitharaman launched the NPS Vatsalya scheme (a pension scheme designed for minors) and unveiled an online platform for subscribing to it. The scheme was first introduced in the July Union budget 2024-25. To promote intergenerational equity, the scheme is designed to encourage parents to save on behalf of their children to secure finances for young individuals.

Features and eligibility criteria for subscribing to NPS Vatsalya –

• It can be enrolled for all young individuals under the age of 18
• The NPS Vatsalya account of the minor can be operated by a Parent or guardian.
• The account can be opened through major banks, Indian post offices, pension funds offices, and an online platform (e-NPS portal).
• KYC documents of the Guardian will be required as proof of Identity and address; for minors, proof of date of birth will be required.
• The minimum contribution limit is Rs. 1000 per Annum with no upper limit.
• Based on their risk appetite and expected returns, Subscribers can make an investment choice between equity and debt and selection of pension funds registered with PFRDA.
• The plan can be seamlessly converted to a Normal NPS account, and on employment, it could be turned into work workplace NPS once the subscriber attain18 years of age,

Partial withdrawal of up to 25% of contribution after a lock-in period of 3 years is allowed a maximum of 3 times for education, specified illness, and disability, till subscribers attain 18 years of age.

In the case of exiting the account at the age of 18 years, there are two scenarios – if the accumulated corpus is Rs. 2.5 lakh or more, 80% of the corpus can be used to buy an annuity to get a regular income after retirement and the remaining 20 % can be withdrawn as a lump sum.

If the accumulated balance is less than 2.5 lakh then the subscriber can withdraw it as a lump sum without purchasing an annuity. This enables people to have some liquidity-based corpus and a steady income source after retirement.

After attaining the age of 18 the NPS Vatsalya account will be transitioned to NPS-Tier I (All citizens). Then all the features, benefits, and exit norms will be applicable as per NPS -Tier I.

 In case of the death of the subscriber, the amount will be credited to the guardian. In case of the death of a guardian, another guardian is to be registered through submitting KYC. In another scenario i.e. upon death of both parents,  the legally appointed guardian can continue the account up to the attainment of 18 years of age or exit the NPS scheme. In this condition legally assigned guardian can with or without making contributions keep the account till the subscriber is 18 years of age.

This NPS Vatsalya scheme is the initiative of the government to provide social security for all citizens. It enables citizens to tap the power of compounding and helps them to accumulate substantial wealth over time. This scheme can secure the financial future of the young generation.