What is the story about?
The Pension Fund Regulatory and Development Authority (PFRDA) has issued the NPS Vatsalya Scheme Guidelines 2025, updating the regulatory and operational framework for the National Pension System (NPS) scheme meant for minors.
The new guidelines, notified through a circular dated January 7, replace the earlier instructions issued in September 2024.
The updated framework will come into effect from a date to be notified, after PFRDA completes system-level preparations.
NPS Vatsalya now classified as a specific purpose scheme
One of the key changes is the formal classification of NPS Vatsalya as a “Specific Purpose Scheme” under Regulation 4A of the PFRDA (Exit and Withdrawals under NPS) Regulations, 2015.
This follows regulatory amendments notified in December 2025, allowing PFRDA to issue scheme-specific rules for exits, withdrawals and operations.
Clearer rules on withdrawals for minors
The 2025 guidelines provide detailed clarity on partial withdrawals for minor subscribers. Partial withdrawals are permitted after three years from account opening for specific purposes such as:
Withdrawals are capped at 25% of total contributions (excluding returns), with limits on the number of withdrawals allowed before and after the subscriber attains the age of 18.
Defined transition process after age 18
The updated guidelines outline what happens after a subscriber turns 18:
The account can continue under NPS Vatsalya for up to three additional years
Fresh KYC and nomination details are mandatory
Subscribers can choose to shift to the NPS All Citizen Model, withdraw up to 80% as lump sum with annuitisation of the balance, or fully withdraw if the total corpus is below ₹8 lakh
If no choice is exercised by age 21, the account will automatically shift to a high-risk equity-oriented option under the Multiple Schemes Framework of the same pension fund.
Investment framework now formally defined
The guidelines specify asset allocation limits for NPS Vatsalya investments, allowing higher equity exposure compared with many traditional savings products:
The investment framework aligns with the latest NPS Master Circular (March 2025).
Incentives introduced for grassroots enrolment
Another new feature is a targeted incentive framework to boost enrolment, especially in rural and semi-urban areas. Anganwadi workers, ASHA workers, Bank Sakhis and other government-recognised community workers will be eligible for incentives of up to ₹100 per NPS Vatsalya account enrolled.
The incentive structure will be reviewed after one year.
Charges aligned with regular NPS accounts
The guidelines clarify that charges and fees under NPS Vatsalya will remain the same as the NPS All Citizen Model, covering PoPs, CRAs, pension funds, NPS Trust and custodians.
The new guidelines, notified through a circular dated January 7, replace the earlier instructions issued in September 2024.
The updated framework will come into effect from a date to be notified, after PFRDA completes system-level preparations.
NPS Vatsalya now classified as a specific purpose scheme
One of the key changes is the formal classification of NPS Vatsalya as a “Specific Purpose Scheme” under Regulation 4A of the PFRDA (Exit and Withdrawals under NPS) Regulations, 2015.
This follows regulatory amendments notified in December 2025, allowing PFRDA to issue scheme-specific rules for exits, withdrawals and operations.
Clearer rules on withdrawals for minors
The 2025 guidelines provide detailed clarity on partial withdrawals for minor subscribers. Partial withdrawals are permitted after three years from account opening for specific purposes such as:
- Education
- Treatment of specified illnesses
- Disability exceeding 75%
Withdrawals are capped at 25% of total contributions (excluding returns), with limits on the number of withdrawals allowed before and after the subscriber attains the age of 18.
Defined transition process after age 18
The updated guidelines outline what happens after a subscriber turns 18:
The account can continue under NPS Vatsalya for up to three additional years
Fresh KYC and nomination details are mandatory
Subscribers can choose to shift to the NPS All Citizen Model, withdraw up to 80% as lump sum with annuitisation of the balance, or fully withdraw if the total corpus is below ₹8 lakh
If no choice is exercised by age 21, the account will automatically shift to a high-risk equity-oriented option under the Multiple Schemes Framework of the same pension fund.
Investment framework now formally defined
The guidelines specify asset allocation limits for NPS Vatsalya investments, allowing higher equity exposure compared with many traditional savings products:
- Equity: 50–75%
- Government securities: 15–20%
- Debt instruments: 10–30%
The investment framework aligns with the latest NPS Master Circular (March 2025).
Incentives introduced for grassroots enrolment
Another new feature is a targeted incentive framework to boost enrolment, especially in rural and semi-urban areas. Anganwadi workers, ASHA workers, Bank Sakhis and other government-recognised community workers will be eligible for incentives of up to ₹100 per NPS Vatsalya account enrolled.
The incentive structure will be reviewed after one year.
Charges aligned with regular NPS accounts
The guidelines clarify that charges and fees under NPS Vatsalya will remain the same as the NPS All Citizen Model, covering PoPs, CRAs, pension funds, NPS Trust and custodians.
