NPS Vatsalya Scheme: The NPS Vatsalya announced by the central government has received a positive response from the people as around 9,700 underage subscribers joined the scheme on the first day of its launch. The scheme, launched this week, is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The scheme offers parents and guardians an opportunity to start saving early for their children’s retirement using the power of interest on interest.
NPS Vatsalya is a unique scheme in India’s emerging pension landscape. Finance Minister Nirmala Sitharaman officially launched the NPS Vatsalya scheme on September 18. It was announced in the Union Budget 2024-25. PFRDA said in a statement on Friday that NPS Vatsalya received a good response on the first day of the offer. 9,705 minor subscribers joined the scheme through various points of presence (POPs) and the e-NPS portal. Of these, 2,197 accounts were opened through the e-NPS portal. There are 3 options to invest here
Options to invest in NPS Vatsalya
Parents can choose any pension fund for their children that is registered with the PFRDA. There are three options available to invest in this scheme:
- Active choice: In this option, parents can invest the funds up to 75% in stocks or up to 100% in corporate debt or up to 100% in government bonds or up to 5% in other assets.
- Automatic selection: In this option, parents can invest the amount they want in different life cycles i.e. LC. In this option, parents can choose LC-75 (Aggressive) where 75% of the amount will be allocated in stocks. In LC-50 (Moderate) 50% and in LC-25 (Conservative) 25% of the amount will be allocated in stocks.
- Default option: In this option, 50% of the amount to be invested will be allocated to capital.
Details about NPS Vatsalya Program
In this NPS Vatsalya scheme, an account can be opened in the name of the child with a minimum of Rs 10,000 per year. There is no maximum investment limit. This scheme comes with a stipulated period of 3 years. After that period, if the child is below 18 years of age, up to 25% of the total contribution can be withdrawn in circumstances such as his/her education, illness and disability. In this way, the money can be withdrawn a maximum of 3 times. This account can be opened through bank, post office, online platform or e-NPS.
After the child turns 18, the child’s NPS Vatsalya account can be converted into a regular NPS account. The child can then continue his or her NPS account if he or she wishes. After the age of 18, at least 80% of the total amount deposited in the account will go towards the annuity plan and the remaining 20% can be withdrawn in a lump sum.
Thus, if parents contribute Rs 10,000 annually to their child’s NPS Vatsalya account for 18 years, a fund of Rs 500,000 will accumulate with an estimated return of 10%. If this investment continues till the investor turns 60, a fund of Rs 2.75 crore will accumulate with a return of 10%.
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