Eligibility and Scope
The NPS Vatsalya scheme is specifically designed for children under 18 years of age, with parents or legal guardians acting as account managers. The scheme is also
available for Non-Resident Indians (NRIs) and Overseas Citizen of India (OCIs). This initiative emphasizes the importance of instilling saving habits in children from a young age, thereby securing their future financial standing. Investment strategies within NPS Vatsalya are geared towards long-term growth, which is facilitated by a diversified allocation across various asset classes. The allocation includes 50–75% in equity, 10–30% in debt instruments, and 15–20% in government securities, offering a balanced approach to risk and return. Furthermore, the minimum annual contribution is Rs 250, making it an accessible option for various income groups. Contributions can be made by parents, relatives, or even friends through both online and offline modes, offering flexibility for investors.
Opening an Account
The quickest and most convenient way to open an NPS Vatsalya account is through the online eNPS portal. First, parents or guardians need to navigate to the 'NPS Vatsalya (Minors)' registration section on the official eNPS portal. Then, they are required to enter their details, including their full name, PAN number, mobile number, email ID, and date of birth, for verification through OTP. The next step involves providing the minor's details, such as their full name, date of birth, and gender. The system will then verify the details using Aadhaar or DigiLocker information. After completing the verification, the application must be authenticated using e-Sign or dual OTP authentication. Finally, the account opening process includes choosing a Pension Fund Manager (PFM) and an investment option – either Auto Choice or Active Choice. Once the application is submitted successfully, a unique Permanent Retirement Account Number (PRAN) will be generated for the minor, followed by an initial contribution of a minimum of Rs 1,000. Subsequently, scanned copies of the required documents, within the size limit of 4KB-2MB, must be uploaded.
Investment Strategy
Investments within the NPS Vatsalya scheme are structured for long-term growth, offering a diversified approach across different asset classes to optimize returns and manage risk. The investment allocation typically includes a significant portion in equity, ranging from 50% to 75%, allowing for substantial growth potential. Moreover, a portion of the investments is allocated to debt instruments, usually between 10% and 30%, which provides stability to the portfolio. An additional portion is placed in government securities, constituting around 15% to 20%, which offers a relatively safer investment option. The scheme offers two primary investment choices: Auto Choice and Active Choice. Under the Auto Choice, the allocation across asset classes is determined automatically based on the age of the subscriber and the risk profile. Conversely, under the Active Choice, parents or guardians have more control, as they can select a Pension Fund Manager and decide the allocation. The minimum contribution required is Rs 250 per year, making it an accessible option.
Withdrawal Rules
Withdrawals under the NPS Vatsalya scheme have specific regulations, particularly before the child turns 18 years old. Partial withdrawals are permitted after three years from account opening. However, these are limited to 25% of the total contributions and are capped at a maximum of two withdrawals before the child reaches adulthood. These partial withdrawals are allowed only for specific needs, such as education, treatment of serious illnesses, or disability above 75%. Once the child turns 18, they can choose to either shift fully to the regular NPS (All Citizen Model) or withdraw the funds. The scheme allows the withdrawal of the full amount if the total corpus is below Rs 8 lakh. If not, the child can withdraw up to 80% as a lump sum and invest the remaining amount in an annuity. The scheme also mandates that the child must be the sole beneficiary of the funds.
Post-18 Options
Once the child attains majority, they have several options regarding their NPS Vatsalya account. First, the subscriber must complete fresh KYC. If the subscriber is at age 21 and no action has been taken, the account is automatically shifted to a high-risk equity option under NPS rules. After the child turns 18, they can choose from several options regarding their NPS Vatsalya account. They can either withdraw up to 80% of the corpus as a lump sum and invest the remaining amount in an annuity, or shift fully to the regular NPS (All Citizen Model). Alternatively, if the total corpus is below Rs 8 lakh, the subscriber can choose to withdraw the full amount. The decision making rests with the account holder after they turn 18, allowing them to manage their accumulated savings.
