NPS Vatsalya: Union Finance Minister Nirmala Sitharaman on Wednesday during the launch of the NPS Vatsalya scheme said that parents and guardians should consider investing in NPS Vatsalya for their minor kids for their birthdays and other occasions.
NPS Vatsalya is a pension scheme focused on minors. It enables parents and guardians to contribute a minimum of rs 1,000 per year towards securing a child’s financial future, ensuring accessibility to families of varying income brackets.
One important aspect of this initiative is that when the minor reaches 18, parents have the option to convert the account to a standard NPS account. This can help in building a substantial retirement fund over time.
Talking about the scheme, which was first proposed in the full Union Budget 2024, FM Sitharaman said NPS Vatsalya will bring in a habit of saving for parents who can invest money for their children.
Noting the advantages of the newly launched scheme, FM Sitharaman said: “NPS Vatsalya will bring in a habit of saving for parents who can invest money for their children. Through NPS Vatsalya, children will get the advantage of the kind of returns that regular NPS funds generate over the long term. You can invest in the name of your children up to the age of 18 years. You can do it through any major bank, post office, pension funds’ office or even through the e-NPS portal. My appeal to all parents is when you attend a birthday party of a child, you can take cakes or other gifts, but money to invest in NPS Vatsalya can also be a form of gift. It will be a lifelong contribution for the child’s future.”
Fm Sitharaman said NPS has achieved returns of 14 percent for equity investments, 9.1 percent for corporate debt investments, and 8.8 percent for G-Secs investments.
Several prominent financial institutions, including ICICI Bank and Axis Bank, have partnered with the Pension Fund Regulatory and Development Authority (PFRDA) to introduce the NPS Vatsalya scheme.
ICICI Bank marked the initiation of the scheme in Mumbai at its service center by enrolling a number of children’s accounts under NPS Vatsalya.
Financial Services Secretary Nagaraju Maddirala emphasized the government’s commitment to enhancing the pension scheme based on feedback received from subscribers.
“NPS Vatsalya is a new initiative within the National Pension System, dedicated to securing the financial future of children. Through this route, parents/guardians can build a retirement corpus for their children from their childhood upto the age of 18. The account is opened in the name of minor and operated by Guardian and the minor is the sole beneficiary of the same. Upon attainment of age of 18 years, this account can be shifted seamlessly to NPS Tier – I (All Citizen). All features of investing through Auto Choice / Active Choice can be utilised for the same as well. By encouraging early investment and providing a structured savings plan, NPS Vatsalya aims to build a robust financial foundation for young individuals. This innovative approach not only ensures that children receive the benefits of disciplined saving and compounding over time but also fosters a sense of financial responsibility from an early age,” said Kurian Jose, CEO, Tata Pension Management.
“The NPS Vatsalya scheme marks a major milestone in India’s pension system. By introducing a dedicated pension system, the government has initiated the creation of a robust foundation for long term financial security of future generations. The scheme encourages the inclusion of diversified investment options, similar to the traditional NPS, ensuring a balanced risk-reward profile for every account holder. This paves the way for future financial independence of children and also offers retirement security to the account holder. It marks a critical step towards building a financially secure future for families while supporting a culture of proactive financial planning and also ensures the country’s workforce is well-prepared for their post-retirement years,” said Preeti Chandrashekhar India Business Leader, Health and Wealth – Mercer, a business of Marsh McLennan.
Amitabh Chaudhry, MD & CEO, Axis Bank, said: “NPS Vatsalya offers a structured and flexible path for wealth creation targeting the future generations of the country, thereby nurturing a financially resilient society. We believe that this will enable parents/ guardians from all socio-economic backgrounds to gain access to valuable tools for securing their children’s financial future, providing them with a strong foundation to build their dreams and aspirations.”