In the Union Budget 2024-25, the Government of India announced a new scheme named NPS Vatsalya Scheme. This initiative is designed to secure the financial future of children by allowing parents or guardians to open a National Pension System account in their child’s name. With an annual contribution starting at just ₹1000, the scheme not only promotes savings but also ensures pension benefits, educational support, and medical security for the child.
Pension Account for Children with Just ₹1000 Investment
Under this scheme, parents or guardians can open an account for their child by depositing a minimum of ₹1000 every year. There is no maximum investment limit, so contributions can be increased as per financial capacity. A unique feature of the scheme is that once the child turns 18, the account automatically converts into a regular NPS Tier-1 account, making the child eligible for pension benefits in the future.
Support for Education and Health Needs
One of the major benefits of the NPS Vatsalya Scheme is the facility of partial withdrawal. If there is a requirement for the child’s education, treatment of a serious illness, or in case of disability, up to 25 percent of the invested amount can be withdrawn. This option becomes available only after the account has been active for at least three years. Partial withdrawals are permitted up to three times, but this facility is valid only until the child reaches 18 years of age.
Full Control to the Child After 18 Years
When the child turns 18, they gain complete control over the account. At this stage, the child is required to complete KYC formalities, and the account becomes a fully regular pension account. From there, the child can decide whether to continue with the scheme or exit. If the account value is less than ₹2.5 lakh, the entire amount can be withdrawn as a lump sum. If it exceeds this threshold, at least 80 percent of the funds must be used to purchase an annuity, which will provide a monthly pension.
Account Security Even After Parents’ Death
The scheme has been designed to provide complete security to the child even in unfortunate circumstances. In case of the parents’ death, the account does not close. A legal guardian can submit the required KYC documents and continue the account. Whether further investments are made or not, the scheme remains active. Once the child turns 18, they will have the freedom to decide whether to continue or close the account. This ensures that the child’s financial future remains protected in all situations.
Teaching Financial Discipline from an Early Age
Apart from financial benefits, the NPS Vatsalya Scheme also instills the value of savings and financial planning in children from a young age. When they grow up, they will already have a strong pension account in their name, making them more financially aware and responsible. This scheme not only provides monetary support but also teaches the importance of financial discipline and future planning, which will benefit them throughout life.
Conclusion
The NPS Vatsalya Scheme is a thoughtful initiative that combines pension benefits, education support, and financial security for children. With a very small investment, parents can ensure their child’s future is protected, while also teaching them the importance of savings and planning.
Disclaimer
This article is meant for informational purposes only. Before investing, please check the latest official guidelines, terms, and interest rates related to the scheme.
