NPS Vatsalya Yojana secures and strengthens the future of children, along with new changes made by the Pension Fund Regulatory and Development Authority (PFRDA) to create a scheme for children to provide retirement and long-term savings from an early age; each child’s parent or guardian can invest on behalf of their child to start the journey towards a pension through the National Pension System (NPS).
What is NPS Vatsalya Yojana?
NPS Vatsalya was introduced in Union Budget 2025-26 and launched on September 18, 2024, by the Union Finance Minister Nirmala Sitharaman. NPS Vatsalya is a voluntary savings scheme that provides a pathway for children to achieve financial independence when they reach adulthood. Contributions to the NPS Vatsalya can start from infancy/childhood and once the child reaches 18 years of age, funds may be transferred to NPS.
Who is eligible to receive benefits under this scheme?
Every Indian citizen under the age of 18 will qualify for this scheme; this includes both NRI and OCI children. The child, the beneficiary, has their own personal account and may have their guardian manage the account.
How much to contribute
The minimum initial and annual contribution under the NPS Vatsalya scheme is just Rs 250. There is no maximum investment limit. The special thing is that apart from parents, relatives and friends can also contribute money to the child’s account, so that a fund can be created collectively for the child’s future.
Pension Fund Selection
Guardians can choose any pension fund registered with the Pension Fund Regulatory and Development Authority (PFRDA). This allows investors to choose a choice based on their preferences and risk-taking ability.
Partial Withdrawal Facility
Partial withdrawal is allowed after three years of account opening. A maximum of 25% of the total contribution (excluding returns) can be withdrawn. This amount can be used for the child’s education, medical treatment, or for certain disabilities. Withdrawals are allowed twice before the age of 18 and twice between the ages of 18 and 21.
Options after maturity at the age of 18
A fresh KYC process will be mandatory after reaching the age of 18. After this, the beneficiary will have three options till he attains the age of 21 years.
- Continuation of NPS Annuity Scheme
- Transfer to NPS Tier-I Account
To exit this scheme, a lump sum payment of up to 80% and a minimum of 20% will be required to purchase pension (annuity). If the total amount is Rs 8 lakh or less, then the entire amount will be allowed to be withdrawn.