NPS Vatsalya for minors to launch in two weeks, find all its details here

NPS Vatsalya, originally proposed in the Union Budget 2024 is a modified version of the National Pension System (NPS), designed specifically for minors

The NPS Vatsalya scheme, a variant of the National Pension Scheme (NPS), but for minors, will be launched within the next two weeks. It was first announced in the Union Budget 2024.

Under this scheme, parents or guardians can open an NPS account for their children, making regular contributions until the child turns 18. (Representational Image/Pixabay)

Under this scheme, parents or guardians can open an NPS account for their children, making regular contributions until the child turns 18.

The government, with the Pension Fund Regulatory & Development Authority (PFRDA) is finalising the details of the scheme, and its official launch will be presided by Finance Minister Nirmala Sitharaman.

How does the NPS Vatsalya scheme work?

The scheme is expected to offer the same diverse investment options, just like the traditional NPS, which includes a mix of equity, government securities, and corporate bonds, which offers flexibility for different risk profiles.

The subscribers have the option to choose either an automatic choice (which adjusts investments based on the age of the subscriber), or an active choice to manage their investments.

Once the child becomes an adult, the account will seamlessly get converted into a regular NPS account, allowing them to manage their investments and savings independently.

The scheme may allow for partial withdrawals after three years of creating the account for educational or medical purposes, but with a cap of 25% on the total contributed amount.

There may also be the option to exit the scheme after the minor turns 18, with 80% of the accumulated contribution to be invested in an annuity plan, while the remaining 20% can be withdrawn as a lump sum.