NPS Vatsalya: All you need to know

Under NPS Vatsalya, parents can begin saving for their child's retirement even before their kids turn 18.

When the child reaches 18, NPS Vatsalya will seamlessly convert into a regular NPS (National Pension Scheme), which is currently the most effective retirement investment option (we explained why NPS can make you a retirement raja in the latest Mutual Fund Insight edition).

What's even better is that the child can continue the same NPS account during their working years, ensuring an even larger retirement corpus.

NPS Vatsalya contribution

As parents or guardians, you need to make an initial contribution of Rs 1,000 when opening the account.

After that, an annual contribution of at least Rs 1,000 is required, with no maximum limit on how much you can invest.

NPS Vatsalya withdrawal rules

Parents or guardians can withdraw up to 25 per cent of the corpus after three years for:
a) education
b) specified illness
c) disability

However, they are limited to three withdrawals until the child turns 18.

NPS Vatsalya investment options

NPS Vatsalya will have all the benefits of a regular NPS. The three investment choices are:

a) Moderate Life Cycle Fund: This option invests 50 per cent of the money in equity. This is the default option.

b) Auto Choice: Here, parents or guardians can choose one of the three options:

• Lifecycle Fund - Aggressive (75 per cent equity)
  
• Moderate (50 per cent equity)
  
• Conservative (25 per cent equity)

c) Active Choice: In this case, parents or guardians can actively decide where they want to invest for their child's retirement. They can invest up to 75 per cent of their money in equity and up to 100 per cent in corporate debt and government securities.

How to open NPS Vatsalya account

NPS Vatsalya can be opened through points of presence (POPs) registered with the Pension Fund Regulatory and Development Authority (PFRDA).

Some of PoPs include major banks, such as ICICI Bank and Axis Bank, India Post and pension funds.

Alternatively, one can also start an account by visiting the online platform (eNPS) of NPS Trust.

NPS Vatsalya documents

• Date of birth proof of the child (Birth certificate/school-leaving certificate/ matriculation certificate/PAN/passport)
  
• Proof of identity and address of the parent/guardian (Aadhaar/driving license/ passport/voter ID/NREGA job card)
  
• NRE/NRO bank account (solo or joint) of the child in case they are an NRI.

Also read: NPS: What will the new Balanced Life Cycle Fund offer?

This article was originally published on September 19, 2024.