The Pension Fund Regulatory and Development Authority (PFRDA) has released guidelines for the National Pension System Vatsalya (NPS Vatsalya), a savings and financial security scheme tailored for minors. These guidelines offer flexible provisions to ensure long-term financial security for minors, with savings continuity upon reaching 18 years of age. The scheme is accessible to all Indian citizens below 18 years, including NRI/OCI, with accounts opened in the minor’s name and operated by a parent or legal guardian.
The NPS Vatsalya scheme requires a minimum initial and annual contribution of Rs 250, with no maximum limit on contributions. Relatives and friends can also make contributions as gifts. Guardians can select a Pension Fund registered with PFRDA, and partial withdrawals are allowed after three years of opening the account for purposes like education, medical treatment, and specified disabilities.
Withdrawals from the account are permitted twice before turning 18 and twice between 18 and 21 years, subject to conditions. Upon reaching 18 years, a fresh KYC is mandatory. Investment options are available until 21 years, allowing the account holder to continue under NPS Vatsalya, shift to NPS Tier I, or exit with up to 80% as a lump sum, with a minimum of 20% annuitized. Full withdrawal is allowed if the corpus is Rs 8 lakh or less.
NPS Vatsalya, introduced in the FY 2024-25 Union Budget and launched on September 18, 2024, aims to help parents and legal guardians build long-term savings for children early on, with the option to transition to the National Pension System upon adulthood. The guidelines also include incentives for community-level workers like Anganwadi workers, ASHAs, and Bank Sakhis to promote awareness and facilitate onboarding, particularly in rural areas.
