The central government has introduced a new scheme to provide financial security to children, similar to the NPS Vatsalya Scheme, which offers long-term benefits.
Union Finance Minister Nirmala Sitharaman launched the scheme on September 18, 2024, and it received an unexpected response of around 10,000 children registered on the first day.
The Pension Fund Regulatory and Development Authority (PFRDA) stated that 9,705 minors subscribed to the NPS Vatsalya scheme on the first day, with 2,197 accounts opened through the e-NPS portal. This has led to a significant increase in the number of people opening Vatsalya accounts.
The NPS Vatsalya account can be opened in the name of children under 18, with a minimum annual investment of Rs. 1,000 required.
After the child turns 18, the account will be converted into a regular NPS account with a three-year lock-in period.
After this period, 25% of the investment can be withdrawn for educational and medical expenses, with a maximum of three withdrawals allowed.
The child’s date of birth certificate and the guardian or parent’s KYC documents are required to open an account. The account can be opened in banks, post offices, or through the e-NPS portal.
It is estimated that if an average investment of Rs. 10,000 per year is made in the child’s name, with an average return of 12.86%, the account could accumulate Rs. 8 lakhs by the time the child turns 18, with 20% of this amount available for withdrawal. The remaining 80% should be used to purchase an annuity scheme.