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NPS Vatsalya Scheme Launched: Secure Your Child's Financial Future Now

The Pension Fund Regulatory and Development Authority has issued detailed guidelines for the National Pension System Vatsalya scheme, designed exclusively for minors. The scheme allows parents or guardians to open an account with a minimum contribution of Rs 250 to build long-term financial security for a child. It offers flexible partial withdrawals for specific needs and mandates a transition to the standard NPS or an exit option once the beneficiary turns 18. Announced in the last Union Budget and launched by the Finance Minister, the initiative aims to foster early savings culture and support the national vision of a financially secure society.

Key Points: NPS Vatsalya Scheme: Guidelines for Child Financial Security

  • Open to all Indian citizens under 18
  • Min Rs 250 initial/annual contribution
  • Partial withdrawals allowed for education/medical needs
  • Account shifts to NPS at age 18
  • Aims to promote financial literacy early
3 min read

PFRDA rolls out NPS Vatsalya Scheme guidelines to bolster financial security for kids

PFRDA launches NPS Vatsalya for minors. Learn about contributions, withdrawals, and how to build long-term savings for your child's future.

"The scheme enables parents and legal guardians to systematically build long-term savings for their children from an early age - Finance Ministry"

New Delhi, Jan 13

The Pension Fund Regulatory and Development Authority has issued the guidelines for providing comprehensive information on the National Pension System Vatsalya, a contributory savings and long-term financial security scheme designed exclusively for minors.

In line with the amendments notified to the PFRDA (Exits and Withdrawals under NPS) Regulations, 2015, the NPS Vatsalya Guidelines lay down flexible provisions for long-term financial security of minors, while ensuring continuity of savings on attaining 18 years of age, according to a Finance Ministry statement issued on Tuesday.

The scheme is open to all Indian citizens, including NRI/OCI, below 18 years of age. The account is opened in the name of the minor, who is the sole beneficiary, and operated by the parent or legal guardian.

The minimum initial and annual contribution for the scheme is Rs 250, while there is no maximum limit on contributions. Contributions can also be gifted by relatives and friends.

The guardian can choose any one Pension Fund registered with PFRDA. Partial withdrawal is allowed after the completion of three years from opening the account. The withdrawal can be up to 25 per cent of own contributions (excluding returns) and is permitted for education, medical treatment, and specified disabilities.

Withdrawals from the account are allowed twice before the age of 18 years and twice between 18 and 21 years, subject to conditions. Once the minor turns 18 years of age, a fresh KYC is mandatory under the provisions.

The investment options are available till 21 years of age. The account holder can continue under NPS Vatsalya, or shift to NPS Tier I (All Citizen Model or any other applicable model), or exit with up to 80 per cent as a lump sum, while a minimum of 20 per cent has to be annuitised.

The full withdrawal of the amount is permitted if the corpus is Rs 8 lakh or less.

NPS Vatsalya was announced in the Union Budget for FY 2024-25 and subsequently launched on September 18, 2024, by Finance Minister Nirmala Sitharaman. The scheme enables parents and legal guardians to systematically build long-term savings for their children from an early age, with a provision to shift to the National Pension System upon attaining majority.

The guidelines introduce a targeted incentivisation framework for community-level workers such as Anganwadi workers, ASHAs, and Bank Sakhis, recognising their role in creating awareness and facilitating onboarding, especially in rural and semi-urban areas.

NPS Vatsalya aims to nurture a culture of savings, promote financial literacy from an early age and strengthen long-term financial planning, aligned with the national vision of Viksit Bharat@2047. The guidelines seek to bring clarity, transparency, and uniformity for all stakeholders, while supporting the broader objective of creating a pensioned and financially secure society, the statement added.

- IANS

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Reader Comments

R
Rohit P
Good step for financial planning. But the awareness is key. Most middle-class families in smaller towns won't know about this. Hope the incentives for Anganwadi and ASHA workers help spread the word effectively.
A
Arjun K
Finally, a structured long-term option for kids beyond the traditional PPF or Sukanya Samriddhi. The option to shift to the main NPS at 18 creates a seamless retirement planning pipeline. Aligns well with the goal of a pensioned society.
S
Sarah B
The inclusion of NRI/OCI children is very practical for families like ours living abroad. It allows us to contribute to our child's future in India. The gifting provision from relatives is also a nice cultural fit for occasions like birthdays.
V
Vikram M
While the intent is good, the guidelines seem complex for the average person. "Fresh KYC at 18", "shift to Tier I", "annuitisation" – these terms can be intimidating. Simpler communication in regional languages is needed for true mass adoption.
K
Kavya N
Teaching kids about savings from an early age is the best part. If parents use this as a tool to explain compounding and financial security to their teenagers, it can build a much-needed money-savvy generation for Viksit Bharat. 💰

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