September 20, 2024: The Indian government has launched a scheme that could secure your children’s future. With this scheme, you can also ensure their safety in old age. Yes, the “NPS Vatsalya Yojana” is a new initiative under the National Pension Scheme. Finance Minister Nirmala Sitharaman launched the NPS Vatsalya Yojana on September 18, an announcement made in the July 2024 budget. This scheme will be managed by the Pension Fund Regulatory and Development Authority (PFRDA).
Various schemes exist in the market for children’s education and marriage. Some people save for better education, while others prepare for weddings. This scheme provides a way to think about the future, ensuring that when your children retire, they won’t have to worry. Imagine if your grandparents or parents had invested in a similar scheme for you; you wouldn’t have to stress about finances today. The NPS Vatsalya Yojana is just that kind of scheme.
Who Can Benefit from NPS Vatsalya?
All minors (individuals under 18 years of age) can participate in the NPS Vatsalya Yojana. To open a Vatsalya account, an initial deposit of at least ₹1,000 is required, followed by an annual contribution of ₹1,000.
How to Open an NPS Vatsalya Account?
Parents can register personally or online through registered banks, post offices, and pension funds. This process can also be completed via the eNPS platform of the NPS Trust. Many banks, such as ICICI Bank and Axis Bank, have partnered with PFRDA to facilitate the NPS Vatsalya initiative.
According to PFRDA, when the child turns 18, the account will automatically convert into a regular NPS Tier 1 account, which will be easily managed under the NPS Tier 1 (General Citizens) scheme, offering various investment features like auto and active options.
Expected Returns and Corpus Amounts
Finance Minister Nirmala Sitharaman stated that the NPS has yielded returns of 14% in equities, 9.1% in corporate bonds, and 8.8% in government securities. If parents contribute ₹10,000 annually for 18 years, at an estimated rate of 10%, this investment could grow to around ₹5 lakh by the end of the term.
If this investment continues until the investor turns 60, the amount could increase significantly based on different return rates. At a 10% return, the corpus could reach approximately ₹2.75 crore. If the average return rate is 11.59% (based on 50% equities, 30% corporate loans, and 20% government securities), the amount could grow to ₹5.97 crore. Similarly, if the return is 12.86% (based on 75% equities and 25% government securities), the fund could reach ₹11.05 crore.