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

The Union Finance Minister, Nirmala Sitharaman, launched NPS Vatsalya, a pension account for minors. The FM also launched an online platform for subscribing to NPS Vatsalya and issued Permanent Retirement Account Number (PRAN) cards to newly registered minor subscribers.

This new program represents a significant advancement in India's pension system, aims to start early in safeguarding children's financial future.

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The Pension Fund Regulatory and Development Authority (PFRDA) will oversee the Scheme's administration.

What is NPS Vatsalya

NPS Vatsalya will allow parents to save for their children’s future by investing in a pension account and ensure long-term wealth with the power of compounding. NPS Vatsalya offers flexible contributions and investment options, allowing parents to make investment of Rs. 1,000 annually in the name of the child, thus making it accessible to families from all economic backgrounds.

"NPS Vatsalya is a new initiative within the National Pension System, dedicated to securing the financial future of children. Through this route, parents / guardians can build a retirement corpus for their children from their childhood upto the age of 18. Account is opened in the name of minor and operated by Guardian and the minor is the sole beneficiary of the same. Upon attainment of age of 18 years, this account can be shifted seamlessly to NPS Tier – I (All Citizen). All features of investing through Auto Choice / Active Choice can be utilised for the same as well. By encouraging early investment and providing a structured savings plan, NPS Vatsalya aims to build a robust financial foundation for young individuals. This innovative approach not only ensures that children receive the benefits of disciplined saving and compounding over time but also fosters a sense of financial responsibility from an early age," Kurian Jose, CEO, Tata Pension Management.

NPS Vatsalya- Withdrawal, exit and death

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.”

Salient features of NPS- Vatsalya

As per the Central Bank of India website:
Scheme: A saving-cum-pension scheme regulated and administered by the PFRDA.
Eligibility: All minor citizens (age till 18 years).

Operations:

• Account opened in the name of minor and operated by Guardian.
• Minor to be the sole beneficiary.

Where to open account

NPS Vatsalya account can be opened through Points of Presence (POPs) which include major banks, India Post, Pension Funds, etc. and the online platform, e-NPS.

"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, provides a range of investment choices and NPS benefits from a young age. Ensure a strong financial start for your child! Open your child's account click https://app.camsnps.com/CRA/auth/enps/register?source=eNPS - CAMS CRA," CAMS said in an SMS sent to NPS investors.

Today, ICICI Bank announced the launch of NPS Vatsalya, a pension scheme aimed at securing children's financial future, at its service centre at BKC in Mumbai, Maharashtra. "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.

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

To register for NPS Vatsalya, customers can visit their nearest ICICI Bank business centre.

Documents required to open NPS-Vatsalya

• KYC of guardian by submitting Proof of Identity and Address.
• Date of Birth proof of the Minor
• NRE/NRO Bank Account (solo or joint) of the minor if the guardian is NRI.

Investment Choices
A guardian may select any pension fund that is PFRDA-registered.

• Default Choice: 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 allocation of funds across Equity (up to 75%), Corporate Debt (up to 100%), Government Securities (up to 100%), and Alternate Asset (up to 5%).