NPS Vatsalya Scheme: Union Finance Minister Nirmala Sitharaman introduced NPS Vatsalya, the much-awaited online platform that can be used to apply for the NPS Vatsalya scheme, which is exclusively meant for young subscribers. NPS Vatsalya is a scheme where parents or guardians can start saving for their minor children and then have options to convert this account to an NPS Tier 1 later.
The scheme, which is a long-term investment scheme, will be managed under the supervision of the Pension Fund Regulatory and Development Authority (PFRDA).
The NPS Vatsalya scheme is open to all Indian citizens, including NRIs, allowing them to create accounts for their minor children. Legal guardians of minors can also open an NPS Vatsalya account. Please ensure that the account is registered in the minor's name. Under the scheme, Permanent Retirement Account Number (PRAN) cards will be issued to newly registered minor subscribers.
ICICI Bank announced the introduction of NPS Vatsalya at its service center in Bandra Kurla Complex (BKC), located in Mumbai, Maharashtra. This new pension scheme, as proposed in the Union Budget of 2024-2025, enables contributions by parents or guardians on behalf of minors until they reach adulthood.
Upon reaching the age of 18, the account holder has the option to convert their NPS Vatsalya account into a standard NPS account.
> Eligibility Criteria: Minor individuals under the age of 18 with a PAN card are eligible to participate in the scheme. > Minimum Contribution: A minimum annual contribution of Rs 1,000 is required, with no maximum limit on contributions. > Contributors: Parents or guardians are allowed to contribute on behalf of their children. > Transition at 18: Upon turning 18, the minor's NPS account will transition to a standard NPS account upon submission of necessary KYC documents.
“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,” said Sriram H., Head – Deposit Products, ICICI Bank.
Investment Choices
There are three types of accounts or investment choices for parents
> 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). > Active Choice: Guardian actively decides allocation of funds across Equity (up to 75%), Corporate Debt (up to 100%), Government Securities (up to 100%), and Alternate Asset (up to 5%).
How to open an NPS Vatsalya account
NPS Vatsalya accounts can be opened through Points of Presence (POPs), which are in major banks, India Post, Pension Funds, etc. and the online platform, e-NPS.
ICICI Bank said it inaugurated the scheme by registering accounts of a few children under NPS Vatsalya. The new subscribers also received a symbolic Permanent Retirement Account Number (PRAN) card for their NPS Vatsalya account.
"NPS Vatsalya Scheme for minors is being launched today. The Scheme allows you to open an account for your child's secure future. This scheme, regulated by PFRDA, provides a range of investment choices and NPS benefits from a young age. Ensure a strong financial start for your child! Open your child's account click https://app.camsnps.com/CRA/auth/enps/register?source=eNPS - CAMS CRA," CAMS said in an SMS sent to NPS investors.
The NPS Vatsalya account will be transitioned into a standard NPS Tier-I (All Citizen) account. Upon reaching the age of 18, a minor individual will be required to undergo a new KYC process.
Documents needed
To open an NPS-Vatsalya account, the following documents are required:
Withdrawal and exit process
As per the details on the Central Bank of India website:
Withdrawal of up to 25% of contribution after a lock-in period of 3 years is permitted for purposes such as education, specified illness, and disability, with a maximum of three times.
Upon turning 18 years old, a seamless transfer to NPS Tier – I (All Citizen) is initiated.
Exit options are as follows:
Upon reaching 18 years of age, if the corpus exceeds Rs. 2.5 lakh: 80% of the corpus is allocated towards the purchase of annuity, and 20% can be withdrawn as a lump sum.
If the corpus is less than or equal to Rs. 2.5 lakh: the entire corpus can be withdrawn as a lump sum.
In the event of the contributor's death, the entire corpus will be returned to the designated guardian.