NPS Vatsalya Scheme: Eligibility, Documents, Investment Choices, Withdrawal Details; How To Open The Account?

In a major good news for parents and guardians, Finance Minister Nirmala Sitharaman launched a new pension scheme which is meant for minors in the age group of 0 years to 18 years. The newly launched scheme is a significant step by the government towards inclusive economic development. The scheme is meant to inculcate the habit of saving for children at an early age.

This new pension scheme for minors is called NPS Vatsalya Yojana which is flexible to open and requires as minimum as Rs 1,000 per annum investment with the option to earn up to Rs 2.5 lakh corpus at the age of 18 years. Further, the scheme can be efficiently converted into a retirement scheme once the child attains the age of 19 years.

Here are some key factors to know about NPS Vatsalya:

Scheme: Contributory Pension Scheme regulated and administered by the PFRDA.

Eligibility: All minor citizens (age till 18 years) are eligible.

Documents required:

- Date of Birth proof of the Minor (Birth certificate, School leaving certificate/ Matriculation Certificate, PAN and Passport)

- KYC of the Guardian shall be carried out by submitting Proof of Identity and Address (Aadhaar, Driving License, Passport, Voter ID card, NREGA Job Card and National Population Register)

- NRE / NRO Bank Account (solo or joint) of the minor in case the guardian is NRI.

Issuance of PRAN: In the name of minor

Contribution: Minimum Rs. 1,000 /- p.a. and maximum no limit.

Pension Fund Selection: The guardian can choose any one of the Pension Fund registered with PFRDA.

Investment Choice:

- 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) as per his/her risk appetite.

- Active Choice: Guardian actively decides the allocation of funds across Equity (up to 75%), Corporate Debt (up to 100%), Government Securities (up to 100%), and Alternate Assets (5%).

Exit / Withdrawal and Death before 18 Years of age:

- Partial withdrawal up to 25% of contribution on a declaration basis after lock-in-period of 3 years for education, specified illness and disability for a maximum of three times till subscribers attain 18 years of age.

Exit upon attainment of 18 years subject to:

- Accumulated Corpus is equal to or greater than 2.5 lakh. Notably, at least 80% of the balance is to be utilized for the purchase of an annuity and the remaining balance in a lump sum.

- Accumulated Corpus is less than 2.5 lakh: Option to withdraw the entire balance as a lump sum

Death of the minor: Entire accumulated Corpus returned to the guardian.

Death of the guardian: Another guardian is to be registered through fresh KYC. In case of the death of both parents, the legally appointed guardian can continue the account with or without making contributions to the account, and upon attainment of 18 years of age, the subscriber has an option to continue or exit from the scheme.

Upon attainment of age of 18 years:

- Seamless shift to NPS Tier - I (All Citizen)

- Fresh KYC of the minor within three months from date of attainting 18 years.

- Upon transitioning, the features, benefits, and exit norms of the NPS-Tier I for All Citizen Model will apply.

How To Open NPS Vatsalya Account:

NPS Vatsalya account can be opened in the name of minor and operated by Guardian. While minor to be sole beneficiary.

Where to open the account?

The NPS for Minor 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 - www.pfrda.org.in).

Second option is the online platform (eNPS) of NPS Trust.

Overall, Vatsalya is a new pension scheme for children in the age group of 0 to 18 years. A parent can deposit a minimum of 1000 per month and a maximum with no limit. This account will be operated by the parents until the child turns 18, after which the account will be in the name of the children. Once the child turns 18, the account can be seamlessly converted into a regular NPS account or a non-NPS scheme.