Finance Minister Nirmala Sitharaman is all set to launch the NPS Vatsalya scheme for minors today. She had announced the scheme in the Union Budget almost two months back on July 23. NPS Vatsalya is an extension of the existing National Pension Scheme, focussing on those below 18 years of age. The investment in NPS Vatsalya will helps parents start financial planning for their children to ensure long-term wealth.
Under this scheme, managed by the Pension Fund Regulatory and Development Authority (PFRDA), parents can begin saving for their child’s retirement fund. This initiative allows them to build a financial foundation that will support their child’s future needs.
What is minimum and maximum investment limit under NPS Vatsalya?
NPS Vatsalya is a financial investment option that allows parents or guardians to invest on behalf of their minor children. You can start with a minimum contribution of just Rs 1,000 per year, and there’s no upper limit on how much you can invest. It’s a great way to give your children financial support until they’re ready to earn and invest on their own.
Also read: NPS Vatsalya can be beneficial for specially-abled children
To be eligible for NPS Vatsalya, you must be a citizen of India and your child should be under the age of 18 years. Additionally, it is important that all parties involved are KYC (Know Your Customer) compliant.
Key benefits of joining NPS Vatsalya?
- Protection against uncertainty and long-term financial security
- Teaching financial responsibility (concept of pension planning)
- Encouragement for long-term investment
- Flexibility in future financial planning
- Benefits of compound interest with long-term investment
NPS Vatsalya withdrawal rules before child turning 18
Withdrawals from NPS Vatsalya can be made even before your child turns 18, subject to certain rules. Partial withdrawals are allowed after three years of joining the NPS, and you can withdraw up to 25% of the total contributed amount. This option is available three times until the subscriber reaches the age of 18.
Partial withdrawals can be made for the purposes of education, treatment of specified illnesses, disability of more than 75%, etc., as specified by PFRDA.
NPS Vatsalya withdrawal rules after child turns 18
After turning 18, subscribers can continue their NPS Vatsalya account, which will be converted into a regular All Citizen NPS Account. It’s important to complete the fresh KYC process within three months of turning 18. Subscribers have the option to exit the NPS, but at least 80% of the accumulated corpus must be reinvested into an annuity plan, while the remaining 20% can be withdrawn as a lump sum. If the total accumulated corpus is less than Rs 2.5 lakh, the entire amount can be withdrawn as a lump sum.
NPS Vatsalya rules in unfortunate cases of death:
Death of subscriber: Entire corpus returned to guardian (guardian is the nominee)
Death of guardian: Another guardian to be registered through fresh KYC
Death of both parents: Legal guardian can continue without making contributions until subscribers attains 18 years of age.
In conclusion, the NPS Vatsalya scheme offers parents a valuable way to invest in their children’s futures. This initiative enables early financial planning and long-term wealth accumulation while promoting financial literacy among minors.