NPS Vatsalya scheme

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The NPS Vatsalya scheme is a new pension program designed for minors, launched as part of the 2024 Union Budget. Managed by the Pension Fund Regulatory and Development Authority (PFRDA), it aims to instill early financial discipline and provide a secure financial future for children. Here's an overview:

Key Features:

1. Eligibility: Open to minors (up to 18 years old), with the account operated by a guardian until the child becomes an adult.
2. Contributions:
   • Minimum: ₹1,000 annually.
   • No upper limit.
3. Investment Choices:
   • Default: Moderate lifecycle fund (50% equity).
   • Other options: Aggressive (75% equity) or conservative (25% equity) lifecycle funds.
   • Active allocation: Equity (up to 75%), debt, government securities, and alternative assets.
4. Account Transition: Upon turning 18, the account transitions into a regular NPS Tier-I account.
5. Withdrawals: Allowed after a three-year lock-in for specific purposes like education or illness, up to 25% of the corpus.
6. Tax Benefits: Contributions and returns are tax-efficient under current NPS rules.

Benefits:

• Builds a financial safety net for retirement.
• Harnesses the power of compounding over time.
• Accessible for families across different income levels.

Limitations:

• Restricted withdrawals make it less flexible for life events like education or marriage.
• Conservative equity cap (75%) limits potential growth for long-term investments​ ICICI Bank mint India Today

.The account can be opened online through the e-NPS platform or at Points of Presence (PoPs) such as banks and post offices. Required documents include proof of identity for the guardian and proof of the minor’s birth.

If you're considering long-term wealth creation with a focus on retirement planning for your child, this scheme can be a strong option. However, for more flexible savings needs, other investment tools might be more suitable.