Finance Minister Nirmala Sitharaman introduces NPS Vatsalya scheme for children's future savings

NPS Vatsalya launched: Finance Minister Nirmala Sitharaman introduced the NPS Vatsalya scheme on Tuesday, enabling parents to invest in a pension account for their children’s future. This new initiative allows parents to start saving for their child's retirement at an early stage.

Parents can set up an NPS Vatsalya account online or at their local bank or post office. The initial deposit required to open the account is Rs 1,000, with an annual contribution of Rs 1,000 needed thereafter. Detailed guidelines for withdrawing funds from these accounts are still under development.

Scheme benefits highlighted

During the launch, Sitharaman highlighted the scheme’s benefits, highlighting that the NPS has consistently delivered competitive returns and provides a reliable way for individuals to save for future income.

NPS Vatsalya is an extension of the existing NPS tailored for children. Over the past decade, the NPS has attracted 1.86 crore subscribers, with assets totaling Rs 13 lakh crore.

Children under 18 can open an NPS Vatsalya account, which will automatically transition to a regular NPS account upon reaching 18. The pension will be available only after the account holder turns 60.

NPS yield breakdown

Sitharaman said that NPS investments have yielded returns of 14% in equity, 9.1% in corporate debt, and 8.8% in government securities.

The NPS Vatsalya scheme was announced in the FY25 Budget presented in July. Several banks, including ICICI Bank and Axis Bank , are collaborating with the PFRDA to roll out the scheme. ICICI Bank kicked off the scheme in Mumbai by registering the first set of children's accounts.

Financial Services Secretary Nagaraju Maddirala assured that the government is open to feedback and will refine the scheme based on subscriber input. "Since announcing the PM Vatsalya scheme, we have received various suggestions to enhance it. We will consider these concerns as we move forward with the implementation," Maddirala said.

(Witrh PTI Inputs)