NPS-Vatsalya: A Financial Plan for Minors to Build Wealth for the Future

NPS-Vatsalya is a tailored investment plan for minors, enabling parents or guardians to secure their child’s financial future through disciplined savings, flexible options, and the power of compounding for long-term wealth creation.

NPS-Vatsalya is a financial investment plan that allows parents or guardians to invest on behalf of their minor children. With a minimum annual contribution of ₹1,000 and no upper limit on contributions, it serves as a thoughtful way to secure a child’s financial future until they become self-reliant.

NPS-Vatsalya allows parents to secure their child’s financial future with flexible investment options, offering long-term growth and compounding benefits.

Eligibility

Open to any citizen of India.
Available for minors up to 18 years of age.
KYC compliance is mandatory.

Why Join NPS-Vatsalya?

Protection Against Uncertainty – Provides financial security and safeguards against unforeseen circumstances, ensuring a stable future.

Teaching Financial Responsibility – Introduces the concept of pension planning early, fostering a sense of financial discipline and responsibility.

Encouragement for Long-Term Investment – Promotes saving for the long term, helping build a substantial corpus for future needs.

Flexibility in Financial Planning – Offers the ability to adjust investments and withdrawals based on evolving financial go als and requirements.

Benefits of Compound Interest – Maximizes wealth growth through the power of compounding over an extended period.

Flexibility in NPS Vatsalya

Before Turning 18

Partial Withdrawals:
- Allowed after 3 years of joining NPS.
- Up to 25% of the contributed amount can be withdrawn.
- Withdrawals are allowed up to 3 times before the subscriber turns 18.
- Permitted purposes include education, treatment of specified illnesses, disability (more than 75%), etc., as per PFRDA guidelines.

After Turning 18

Continuing the Account:
- The subscriber can continue the NPS account beyond 18 years of age.
- The account is converted into a regular All Citizen NPS Account.
- Fresh KYC of the subscriber must be completed within 3 months of turning 18.
Exiting NPS:
- At least 80% of the accumulated corpus must be re-invested in an annuity plan. The remaining 20% can be withdrawn as a lump sum.
- If the accumulated corpus is ₹2.5 lakh or less, the entire amount can be withdrawn as a lump sum.

In Unfortunate Cases of Death

Death of the Subscriber:
- The entire corpus is returned to the guardian, who is the registered nominee.
Death of the Guardian:
- A new guardian must be registered by completing a fresh KYC process.
Death of Both Parents:
- A legal guardian can continue managing the account without making further contributions until the subscriber reaches 18 years of age.

Investment Choices

Active Choice
- Allows you to decide the allocation of your investments across different asset classes such as equity, corporate debt, and government securities.
Auto Choice
- Investments are automatically allocated based on the subscriber’s age and risk profile. Options include:
  - LC-75 (Aggressive): Higher equity exposure (up to 75%) for maximum growth potential, suitable for younger investors.
  - LC-50 (Moderate): Balanced approach with up to 50% equity allocation, offering moderate growth with lower risk.
  - LC-25 (Conservative): Lower equity exposure (up to 25%), prioritizing stability and reduced risk for near-retirement subscribers.

Accumulation of Pension Wealth with NPS-Vatsalya

Contribution: ₹10,000 per year for 18 years.
Corpus at Age 18:
- At a Rate of Return (RoR) of 10%: ₹5 Lakh
Corpus at Age 60:
- RoR 10%: ₹2.75 Crore
- RoR 11.59%: ₹5.97 Crore*
- RoR 12.86%: ₹11.05 Crore#

Disclaimer: This is for illustration purposes only. Calculations are based on historical data and estimates; actual returns may vary.

*The historical average return since inception under NPS with default asset allocation (50% equity, 30% corporate debt, 20% G-Sec) is 11.59% as of 19th July 2024.
#The historical average return since inception under NPS with 75% equity and 25% G-Sec is 12.86% as of 19th July 2024.

How to Join?

Click Open NPS Account and choose your preferred Central Recordkeeping Agency (CRA).
Complete the online registration form and upload the required documents.
Make an initial payment of ₹1,000 or more to activate your NPS account.
Once activated, you will receive a unique PRAN (Permanent Retirement Account Number). An individual can have only one PRAN.
After 24 hours, you will receive a Login ID for your CRA-held account. This Login ID allows you to access and view all account details and transaction history.

Opening your NPS account online typically takes 10–15 minutes.

Kindly keep the below information and documents ready

Aadhaar Card (linked to mobile) or DigiLocker and PAN Card of the parent/guardian.
Proof of the minor’s Date of Birth (e.g., birth certificate, school leaving certificate, matriculation certificate, PAN card, or passport).
Scanned copy of the parent/guardian’s signature.
Ensure UPI or Internet Banking is active for payments.
Scanned document size: 4KB to 2MB.

Important Notes:

Bank account details of the minor are not mandatory for opening the account but will be required for partial withdrawal or exit before turning 18. This includes the account number, IFSC code, and bank name. Ensure the account is in the name of the individual registering for NPS.
If the guardian is an NRI or OCI, NRE/NRO bank details of the guardian are mandatory.

NPS-Vatsalya offers a secure and flexible investment option for minors, fostering financial responsibility and long-term wealth growth. With compounding benefits and robust features, it ensures a stable financial future for your child.

Disclaimer: The information provided in this article is for general informational purposes only. It is not intended as financial or legal advice. Please consult your financial advisor before making any decisions.

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NPS-Vatsalya: A Financial Plan for Minors to Build Wealth for the Future