On 18th September 2024, Union Minister Nirmala Sitharaman, Ministry of Finance (MoF) launched ‘National Pension System Vatsalya(NPS Vatsalya)’, a savings-cum-pension scheme for minors in New Delhi, Delhi.
- The NPS Vatsalya will enable parents and guardians to save their children’s future by investing in a pension account.
- The launch of scheme was simultaneously organised at 75 locations across the country, with distribution of more than 250 Permanent Retirement Account Number (PRAN) to minor subscribers.
Key People: Union Minister of State (MoS) Pankaj Chaudhary, MoF; Nagaraju Maddirala, Secretary, Department of Financial Services (DFS) under MoF; Deepak Mohanty, Chairman, Pension Fund Regulatory Authority of India (PFRDA); and other senior officials from DFS and PFRDA were present at the event.
Note: The NPS Vatsalya scheme was announced by Union Finance Minister in the Union Budget for Financial Year 2024-25 (FY25), which was presented by her on 23rd July, 2024 in Lok Sabha (Lower House of the Parliament).
About NPS Vatsalya Scheme:
i.This scheme is an extension of the already existing NPS to children.
ii.The scheme will be managed by PFRDA and PRAN cards will be issued to newly registered minor subscribers.
iii.The minimum amount required to open the Vatsalya account is Rs 1,000 and thereafter, subscribers will have to contribute Rs 1,000 per annum.
- The scheme does not have the provision of limit on the maximum contribution.
Eligibility Criteria:
i.All minor citizens, who are below the age of 18 years (yrs), are eligible for the scheme. Also, both the child and the parent/guardian must be Indian citizens.
- The beneficiaries of the scheme will avail the benefit of the scheme only after they turn 60.
ii.Under this scheme, account can be opened in the name of minor and operated by his/her parent or guardian. The beneficiary of the scheme will be minor.
iii.NPS Valtsalya account can be opened through various Points of Presence (POPs) regulated by PFRDA which include major banks, Indian Post, Pension Funds, and online platform (e-NPS).
iv.PFRDA will offer various investment choices to subscribers like: government securities, corporate debt, and equity in different proportions based on different risk factors, among others.
Withdrawal Process:
i.After a 3-year lock-in period, a maximum of 3 withdrawals will be allowed i.e. upto 25% of contributions, for reasons including education, a specific disease, or a handicap.
ii.On attaining the age of 18, the NPS Vatsalya account will automatically get converted to a regular NPS account.
- NPS Vatsalya account holders have the option to exit NPS at any time, beyond the age of 18 years.
iii.If the amount deposited in the account surpasses Rs 2.5 lakh at the age of 18, then 80% of that amount will be used to purchase an annuity, and the remaining 20% can be taken as lump sum amount.
iv.The scheme has a provision of lump sum withdrawal of the full capital, only if it is less than or equal to Rs 2.5 lakh.
v.In case the contributor passes away, then, the entire amount will be returned to the appointed guardian.
Key Highlights of the Event:
i.During the event, Union Finance Minister launched an online platform for subscribing to NPS Vatsalya along with that she also released the scheme brochure, detailing the features of the scheme.
ii.While, addressing the event, Union Finance Minister highlighted that the scheme will play a pivotal role in achieving Prime Minister (PM) Narendra Modi’s ‘Viksit Bharat@2047’ vision.
iii.She underscored that NPS Vatsalya marks a significant step in Government of India (GoI)’s endeavour to promote long-term financial planning and security for all the citizens.
iv.During the event, she commended the success of Atal Pension Yojana as 6.90 crore people have subscribed to the Atal Pension Yojana since its inception in 2015 and the corpus worth Rs 35,149 crore has been accumulated.
iv.She has also underlined the competitive returns on NPS scheme for instance: For the government sector, NPS, on an average has given returns of 9.5% Compound Annual Growth Rate (CAGR) since its inception.
- In past 10 years, NPS has 1.86 crore subscribers with an Asset Under Management (AUM) of Rs 13 lakh crore.
- Also, NPS has generated returns for investments in equity (14%), corporate debt (9.1%), and Government Securities (G-Secs) (8.8%).
About the Ministry of Finance (MoF):
Union Minister- Nirmala Sitharaman (Rajya Sabha- Karnataka)
Minister of State (MoS)- Pankaj Chaudhary (Constituency- Maharajganj, Uttar Pradesh, UP)
