NPS Vatsalya Scheme Launched for Minor Subscribers

The much-anticipated NPS Vatsalya scheme has officially launched, offering a new financial avenue for parents and guardians to save for their minor children. Introduced by Union Finance Minister Nirmala Sitharaman, the scheme provides the capability to open accounts for minors, which can later be converted to standard NPS Tier 1 accounts when the child reaches adulthood.

The NPS Vatsalya, a long-term investment plan, is overseen by the Pension Fund Regulatory and Development Authority (PFRDA). This scheme is accessible to all Indian citizens, including Non-Resident Indians (NRIs), enabling them to create accounts for their minor children. Legal guardians are also permitted to open accounts on behalf of minors. Each minor account will be issued a Permanent Retirement Account Number (PRAN) card upon registration.

The scheme’s launch was marked by ICICI Bank at their service center in Bandra Kurla Complex, Mumbai. According to the Union Budget of 2024-2025, this scheme allows contributions by parents or guardians until the minor becomes an adult. Upon turning 18, account holders can transition their NPS Vatsalya account into a standard NPS account.

The eligibility criteria specify that minors must be under 18 years with a PAN card. The scheme requires a minimum annual contribution of Rs 1,000, with no maximum contribution limit. Contributors are primarily parents or guardians, who can continue their contributions until the child reaches adulthood. After the minor turns 18, the account will convert to a standard NPS account, following necessary KYC documentation.

Sriram H., Head of Deposit Products at ICICI Bank, stated, “We have begun this journey by opening our first set of NPS Vatsalya accounts today. We have equipped all ICICI Bank business centres across the country to open the NPS Vatsalya account for customers. This account helps in long-term wealth creation, ensuring that by the time the minor becomes an adult, there is a financial corpus in place for them.”

The scheme offers several investment choices for contributors. The Default Choice entails a Moderate Life Cycle Fund with 50% equity. The Auto Choice option allows guardians to select from aggressive, moderate, or conservative life cycle funds, with equity allocations ranging from 25% to 75%. The Active Choice permits guardians to determine fund allocations across different asset classes, including Equity, Corporate Debt, Government Securities, and Alternate Assets.

Opening an NPS Vatsalya account is facilitated through Points of Presence (POPs) in major banks, the India Post, and other financial institutions, as well as online via the e-NPS platform. ICICI Bank recently initiated the scheme by opening accounts for children at their bank, providing new subscribers with symbolic PRAN cards.

Upon reaching adulthood, the minor’s NPS Vatsalya account transitions seamlessly to an NPS Tier-I (All Citizen) account. Required documents for opening an account include the guardian’s KYC details, proof of the minor’s date of birth, and an NRI account for the child if the guardian resides overseas.

Withdrawal from the NPS Vatsalya account is allowed under specific circumstances, like education or illness, with a 25% limit after a 3-year lock-in period. For a corpus exceeding Rs. 2.5 lakh, 80% must be used to purchase an annuity, while 20% can be withdrawn lump sum upon attaining 18 years of age. Entire corpus withdrawal is allowed if the corpus is Rs. 2.5 lakh or less, or in the event of the contributor’s death, it is returned to the guardian.