5 min read • Published 20 Feb 25
NPS Vatsalya Scheme: Everything You Need to Know
Table of Contents
A pension incentive scheme introduced by the Pension Fund Regulatory and Development Authority (PFRDA) of India, specifically for the long-term security of minors,is known as the NPS Vatsalya Scheme. In this, the parent, or guardian opens an account for their children below the age of 18. Guardians contribute annually till the child completes 18 years.
After this maturity, the amount can be withdrawn or the child can get its benefit in his/her retirement period. Understanding the dynamics of this unique scheme can help individuals plan and secure their children’s long-term future.
What is the NPS Vatsalya Scheme?
It is a pension scheme, which allows parents to invest for their children’s retirement benefits. In this, a Permanent Retirement Account Number (PRAN) is generated during the start of the scheme, and investors contribute to this scheme. It has a similar structure to the National Pension Scheme (NPS) to receive contributions in pools and invest in marketable securities.
Due to the NPS Vatsalya Scheme launch, a separately designed scheme for minors is introduced. It aims to anchor the saving habit among kids. Moreover, its government backing and market exposure make it an attractive avenue for a child’s future.
Contributions under the NPS Vatsalya Scheme
In this scheme, parents or guardians need to contribute a minimum of ₹1000 every year. It does not prescribe a higher limit for contribution. Investors can select their scheme from the following options based on their expected investment lifecycle.
| Scheme Variety | Investment Description |
| Default Choice (moderate) | Up to 50% to equities |
| Auto Choice (aggressive) | Up to 75% to equities |
| Auto Choice (moderate) | Up to 50% to equities |
| Auto Choice (conservative) | Up to 25% to equities |
| Active Choice | Up to 75% to equities orUp to 100% in corporate debt orUp to 5% to alternate assets |
NPS Vatsalya Pension Scheme mainly invests the contributions in these asset classes:
- Class A: Alternate assets.
- Class C: Corporate debt rated A, AA, AAA or higher.
- Class E: Equity of top 200 companies on exchanges, based on market cap.
- Class G: G-Secs and State Development Loan
Eligibility
Some of the basic norms prescribed as the eligibility for investing in the NPS Vatsalya Pension scheme are as follows:
- Beneficiary Age: Under 18 years (minor)
- Residency: Indian for the minor. Parents/Guardians can be Non-Resident Indians.
- Involvement: The parent/Guardian can only invest on behalf of the minor till he/she is 18 years.
- Documentation and Know Your Customer (KYC) process: That of child and parents/guardians while opening the account. Aadhar and PAN cards are allowed.
- Attaining 18 years: Fresh KYC of the child by submitting birth proof.
The initial details, such as mobile number and email ID, will receive the regular periodic statement of the investment performance.
How to Open an NPS Vatsalya Scheme Account?
This scheme can be highly suitable for a diverse range of investors due to its scope, and investors can open an account under the NPS Vatsalya Pension Scheme in these easy steps:
Step 1: The scheme has appointed certain banks, post offices and other PFRDA offices as Point of Presence (POP). Investors can visit them offline. Otherwise, the investors can visit the online portal of eNPS.
Step 2: Enter the basic details regarding the investor and child. Upload the documents for the KYC procedure.
Step 3: Make the account opening contribution and start your investments today.
Withdrawal under the NPS Vatsalya Scheme
This scheme is flexible enough to allow different ways to withdraw the investment. Based on its conditions, investors can withdraw their investment or continue for compounded returns.
| Withdrawal Conditions | Description |
| Before 18 years (Partial withdrawal) | 3 years lock-in, up to 25% withdrawal, genuine reasons for withdrawal, Only 3 withdrawals allowed. |
| Conversion to regular NPS(At 18 years) | Fresh KYC and documents, controlled by the child, Tier 1 NPS. |
| Exit at maturity(At 18 years) | Minimum 80% annuity, 20% in lump sum, allowed full lump sum of less than ₹2.5 lakhs. |
| Death of Minor | Corpus to parent, guardian or nominee. |
| Death of Guardian | Fresh KYC with a new guardian. |
| Death of Parent | Legal guardian up to 18 years of age. |
Due to this wide variety of options, investors have the benefit for planning their withdrawal as per the child’s future needs. NPS Vatsalaya Scheme can provide the edge of financial security in the growing inflation period. Overall, investors can get multiple benefits from this scheme.
Conclusions
Investing in the NPS Vatsalaya Scheme can provide the desired feature of market exposure and government guarantee for a children’s scheme. It aims to safeguard the minor’s future with a significant corpus from investor contribution and investment’s market value. Parents or guardians can explore its details, visit the PPOs or log in to the online portal of eNPS to invest in this scheme.
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Q: Who is the main beneficiary of the NPS Vatsalya scheme?
Parents or guardians are required to invest on behalf of their child in this scheme. Therefore, the main beneficiaries are minors, aged below 18 years.
Q: What charges are applicable in the NPS Vatsalya scheme?
At different stages, the charges for the NPS Vatsalya scheme are applicable. Early withdrawal charges, annual maintenance and initial investment charges are some of the fees applicable.
Q: Can an NRI open an account in the NPS Vatsalya scheme?
Yes, NRIs can use this scheme to secure their children’s future. The basic requirement for this is that the kid should be an Indian citizen. The guardian or parent can be NRI.
Q: What is the minimum contribution for the NPS Vatsalya scheme?
Investment in this scheme requires a minimum contribution of ₹1000 every year. However, there is no maximum limit for investment.
Q: How much lump sum amount can be withdrawn from the NPS Vatsalya scheme?
Upon the maturity of the investment, investors can withdraw 20% of the compounded corpus. Before maturity, investors can withdraw 25% of the total contribution after completing a lock-in period of 3 years.
