Union Finance Minister Nirmala Sitharaman has launched NPS Vatsalya, a retirement account for minors. The Finance Ministry also launched an online platform for subscription to NPS Vatsalya and issued a Permanent Retirement Account Number (PRAN) to the newly registered minor subscribers.
This new scheme marks a significant advancement in India’s retirement system and aims to start securing the financial future of children at an early stage. The Pension Fund Regulatory and Development Authority (PFRDA) will oversee the administration of the scheme.
What is NPS Vatsalya?
NPS Vatsalya enables parents to save for their children’s future by investing in a retirement account and securing long-term wealth with the power of compound interest. NPS Vatsalya offers flexible contributions and investment options that allow parents to invest Rs 1 lakh annually on behalf of the child, making it accessible to families from all economic strata.
NPS Vatsalya Withdrawal, Exit and Death
As per the Central Bank of India website, withdrawal of up to 25% of contribution is permitted after a lock-in period of 3 years for education, certain diseases and disability. Maximum of 3 times.
– On completion of 18 years, seamless transition to NPS Tier – I (All Citizen).
Exit possible on completion of 18 years:
Corpus of more than Rs 2.5 lakh: 80% of the corpus will be used for purchasing an annuity and 20% can be withdrawn as a lump sum.
– Assets less than or equal to Rs 2.5 lakh. The entire balance can be withdrawn as a lump sum.
– In case of death, the entire asset will be returned to the guardian.
Where to Open an Account?
The NPS Vatsalya account can be opened through Points of Presence (POPs) which include major banks, Indian Post Office, pension funds etc. and through the online platform e-NPS.
“The NPS Vatsalya scheme for minors is being launched today. The scheme allows you to open an account for your child’s secure future. This scheme, regulated by PFRDA, offers a range of investment opportunities and NPS benefits from a young age. Get your child off to a good financial start! Open the account for your child at https://app.camsnps.com/CRA/auth/enps/iegister?source=eNPS – CAMS CRA,” CAMS said in an SMS to NPS investors.
Key features of the Vatsalya NPS account, according to a press release from ICICI Bank:
Eligibility criteria: Any minor below 18 years of age who has a PAN card and Aadhar card is eligible.
Minimum contribution: The minimum contribution is Rs 1,000 per year, and there is no limit on the maximum contribution.
Contributors to the scheme:
Parents/guardians can contribute on behalf of their children
Transition after completing 18 years of age: The minor’s NPS account will be converted into a standard NPS account after submitting the required KYC documents.
Documents required to open NPS-Vatsalya
KYC of the guardian by submitting identity and address proof.
– Proof of date of birth of the minor
– NRE/NRO bank account (single or joint) of the minor if the guardian is an NRI.
Selection of investments
A guardian can choose any pension fund registered with the PFRDA.
Default selection: Moderate Life Cycle Fund
– LC-50 (50% equity).
– Auto-choice: Guardian can choose
Lifecycle Fund – Aggressive – LC-75 (75% equity), Moderate LC-50 (50% equity), or Conservative LC-25 (25% equity).
– Active choice: Guardian actively decides the allocation of funds to equities (up to 75%), corporate bonds (up to 100%), government bonds (up to 100%), and alternative investments (up to 5%).
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