Finance Minister Nirmala Sitharaman announced the NPS Vatsalya Scheme on September 18, 2024. This scheme is a saving-cum-retirement scheme, in which parents and guardians can invest annually for their children. In this article, we will understand how much pension your child will get if you invest Rs 1000 every month.

NPS Vatsalya investment amount and terms

It is mandatory to invest at least Rs 1,000 annually in NPS Vatsalya Yojana, while there is no maximum investment limit. Partial withdrawal and pension benefits are also available in this scheme. The scheme is for children below 18 years of age, and when the child turns 18, the parent’s investment ends, and the fund is converted into NPS Tier-1.

Also read: Federal Bank launches NPS Vatsalya: Know steps to open a pension account for your child

NPS Vatsalya: Investment calculation

If you invest Rs 1,000 every month (which totals Rs 12,000 a year) and increase this contribution by 10% each year, your total investment will grow to Rs 5,47,190 by the time your child turns 18. With an estimated return of about 10%, this will accumulate approximately Rs 7 lakh in interest, bringing the total fund to around Rs 12 lakh.

Now, if the child continues this investment pattern with a 10% increase each year until reaching retirement at 60, the total corpus could grow to Rs 15.34 crore.

According to NPS rules, 40% of this amount (Rs 6.14 crore) must be invested in an annuity scheme. Assuming an annual return of about 6%, this would provide a monthly pension of around Rs 3.06 lakh.

Also read: NPS Vatsalya: Which banks are offering facility to open an NPS account for your minor child?

NPS Vatsalya: Key calculation pointers

Monthly Investment:

Invest Rs 1,000 per month.

Annual total: Rs 12,000.

Annual Increase:

Increase the investment by 10% each year.

Investment Duration

Total investment period until the child is 18 years old.

Total Investment at Age 18:

By age 18: Total investment = Rs 5,47,190.

Estimated interest earned = Rs 7 lakh.

Total fund amount = Rs 12 lakh.

Continuing Investment:

If the child continues the same investment pattern until age 60, total corpus = Rs 15.34 crore.

Annuity Investment Requirement:

40% of the corpus must be invested in an annuity.

Amount invested in annuity = Rs 6.14 crore.

Estimated Pension:

Assuming a 6% return on the annuity, monthly pension = Rs 3.06 lakh.

In summary, the NPS Vatsalya scheme can create a strong financial foundation for your child’s future.