The NPS Vatsalya Scheme, a recent government initiative, provides a secure avenue to safeguard your child’s financial future.
Introduced in the July 2024 budget by Union Finance Minister Nirmala Sitharaman, this scheme is overseen by the Pension Fund Regulatory and Development Authority (PFRDA).
Through this scheme, parents or guardians can build a retirement corpus for their children from infancy to 18 years of age by opening an account in the child’s name.
All minors 18 years of age are eligible to participate in the NPS Vatsalya Scheme, with an initial contribution of at least Rs 1,000 and an annual contribution of Rs 1,000.
How to Open an NPS Vatsalya Account? Opening an NPS Vatsalya account is straightforward and can be done online or in person at registered points such as banks, post offices, and pension funds, including through the NPS Trust e-NPS platform.
After the child turns 18, the account automatically converts into a regular NPS Tier 1 account, ensuring a seamless transition to the NPS Tier 1 (All Citizen) plan.
Encouraging early investment and structured savings, NPS Vatsalya aims to create a solid financial foundation for young people, promoting disciplined savings and compounding benefits. According to Nirmala Sitharaman, NPS has given returns of 14% in equity, 9.1% in corporate debt, and 8.8% in government securities.
With an annual contribution of Rs 10,000 for 18 years, the investment could potentially grow to a corpus of around Rs 5 lakh at a 10% return on investment (ROI).
If the investor continues to invest until the age of 60, the expected corpus could vary significantly based on different rates of return.
For instance, with a 10% ROI, the corpus could reach Rs 2.75 crore, offering a promising outlook for your child’s financial future.
Furthermore, with an average return of 11.59% based on the standard NPS allocation, the expected amount could rise to around Rs 5.97 crore.
With a higher average return of 12.86% from a portfolio allocation, the corpus could reach Rs 11.05 crore. It’s important to note that these figures are for illustrative purposes only, and actual returns may vary.
This is an informational article only. Consult a SEBI Registered Financial Advisor before starting any investment.