Finance Minister Nirmala Sitharaman on Wednesday launched the NPS Vatsalya scheme, which will allow parents to save for their children’s future by investing in a pension account. Parents can subscribe to NPS Vatsalya online or visiting a bank or post office.

The minimum contribution to open Vatsalya account is Rs 1,000. Subscribers will have to contribute Rs 1,000 annually thereafter. The guidelines for withdrawal from NPS accounts are being finalised.

Launching the scheme, Sitharaman said NPS has generated very competitive returns and offers the option to people to save while ensuring future income.

NPS has generated 14 per cent, 9.1 per cent, and 8.8 per cent returns for investments in equity, corporate debt and G-Secs, respectively, Sitharaman said.

Financial Services Secretary Nagaraju Maddirala said the government will be receptive of subscriber feedback and improve pension scheme accordingly.

“Ever since we have announced the proposed launch of PM Vatsalya scheme, we have been getting feedback and suggestions to improve the scheme. As we go along and implement the Vatsalya scheme, we will try to improve so that concerns expressed in the last one week are taken care,” Maddirala said.

What is NPS Vatsalya?

NPS Vatsalya is a specialised variant of the National Pension System (NPS) tailored for minor children. Parents or legal guardians can open and contribute to this account until the child attains the age of 18. Once the child reaches adulthood, the account can seamlessly transition into a standard NPS account.

Salient Features of NPS Vatsalya

Early Start: Begin saving for your kid’s retirement as early as possible.

Long-Term Growth: Benefit from the power of compounding over a long investment horizon.

Tax Benefits: Enjoy potential tax deductions under Section 80C of the Income Tax Act.

Flexibility: Choose from various investment options to align with your risk appetite.

Government Backing: The scheme is backed by the Government of India, ensuring safety and credibility.

Eligibility Criteria

To open an NPS Vatsalya account, you must fulfill the following conditions:

• You must be a parent or legal guardian of the minor child.
• The child must be below 18 years of age.
• You can be an Indian citizen, Non-Resident Indian (NRI), or Overseas Citizen of India (OCI).

Where to open account?

The NPS Vatsalya account can be opened through Point of Presence (POPs) registered with PFRDA either online or physical mode, which include major banks, India Post, Pension Fund etc. (List of PoPs is available on PFRDA website). It can also be opened through online platform (eNPS) of NPS Trust.

Choose a Pension Fund Manager (PFM): Guardian can choose any one of the Pension Fund registered with PFRDA. Select a PFM from the list of authorised ones.

Gather Required Documents: Prepare the necessary documents, including the child’s birth certificate, your identity proof, and address proof.

Complete the Application Form: Fill out the NPS Vatsalya application form with accurate details.

Make Initial Contribution: Deposit the minimum required amount to initiate the account.

Account Activation: Once the formalities are complete, your NPS Vatsalya account will be activated.

Investment Options

Similar to the standard NPS, Vatsalya offers a mix of investment options:

Equity: Invest in stocks for higher potential returns but with associated risks.

Corporate Debt: Opt for investments in corporate bonds for moderate returns and lower risk.

Government Securities: Choose government bonds for stable returns and minimal risk.

Benefits of NPS Vatsalya

Secure Retirement: Build a substantial corpus for your child’s retirement.

Tax Savings: Avail tax benefits under Section 80C of the Income Tax Act.

Financial Discipline: Cultivate a habit of saving for the future from a young age.

Flexibility: Choose investment options based on your risk tolerance.