Finance Minister Nirmala Sitharaman has launched a long-term savings programme for children called the NPS Vatsalya scheme.
The scheme, which is an extension of the existing National Pension Scheme, is focused on children and the investments made in this account will be to ensure long-term funds for the accountholder. It was launched on 18 September 2024.
Under the scheme, which will be run by the Pension Fund Regulatory and Development Authority (PFRDA), parents can save for their child's retirement fund. NPS Vatsalya allows flexible contributions and investment options, allowing parents to invest as little as INR1,000 ($12) annually in their child's name.
The launch of NPS Vatsalya underlines the Indian government's commitment to promoting long-term financial planning and security for all.
Details about NPS Vatsalya scheme
Investment focus: The investment strategy of the NPS Vatsalya focuses on securing long-term wealth for the beneficiaries. Compound interest can greatly boost earnings over a long investment period. The maximum equity exposure for the NPS remains capped at 75%, which applies to NPS Vatsalya as well.
Limit of Investments: The NPS Vatsalya offers a variety of investment options and allows for flexible contributions. Parents have the option to make a minimum annual investment of INR1,000 in their child's name, making the scheme accessible to families from diverse economic backgrounds.
Eligibility: All parents and guardians, regardless of their status — Indian citizens, non-resident Indias, or overseas citizens — can open an NPS-Vatsalya account on behalf of their underage dependents.
Long-term benefits: Once the child reaches adulthood, their account will seamlessly convert into a standard NPS account.
NPS Vatsalya could play a crucial role in cultivating a pension-oriented mindset among Indians, contributing to the country's long-term economic stability.