NPS Vatsalya for children: Finance Minister Nirmala Sitharaman set to launch the scheme shortly; Know the features, benefits, eligibility and more

Is NPS Vatsalya a good choice for parents looking to create long-term wealth for their children?

Finance Minister Nirmala Sitharaman is all set to roll out National Pension System (NPS)-Vatsalya, a scheme meant for parents who wish to create a long-term corpus for their minor children’s secure future.

Details of the scheme will be unveiled shortly at an event in Delhi, to be attended by school children. Simultaneously, the government is organising launch events at 75 locations across the country. The scheme was announced in Budget 2024.

FM Sitharaman will distribute PRAN (permanent retirement account number) membership to new minor subscribers in these locations. “This new initiative is designed to start early in securing financial future of children, marking an important step in India’s pension system… NPS Vatsalya will allow parents to save for their children’s future by investing in a pension account and ensure long-term wealth with the power of compounding,” the finance ministry said in a press release.

Also read: NPS Vatsalya announced in Budget 2024

Key features and benefits

· Nirmala Sitharaman will launch an online platform for subscribing to the scheme

· Under NPS Vatsalya, parents can contribute a minimum of Rs 1,000 annually in the name of their children.

· Like the larger NPS architecture, Pension Fund Regulatory and Development Authority (PFRDA) will be the regulator for this scheme too.

· Once they attain the age of majority (18 years), it can be converted into a regular NPS account.

· FM Sitharaman will release the scheme brochure with detailed features, benefits and other conditions on September 18, and it remains to be seen if additional tax benefits are rolled out to incentivise parents to invest in this scheme.

· Parents keen on investing in this scheme will also need to keep an eye on the premature, partial withdrawal options that may be specified, as the need to dip into this corpus to fund their education costs might arise in the interim.

· Under regular NPS, subscribers can withdraw up to 25 percent of their own contribution before the age of vesting (60 years) to fund important needs such as children’s education, critical illness treatment, house purchase and so on.