If you are planning for your child’s secure and bright future, this news is important. The Pension Fund Regulatory and Development Authority (PFRDA) has issued new guidelines for the NPS Vatsalya scheme for children.
These changes aim to make the scheme more flexible, transparent, and useful for families, providing relief to investors when needed and ensuring better long-term returns.
About NPS Vatsalya
NPS Vatsalya is a government pension scheme designed for minor children. Parents or guardians can invest in their child’s name to secure their future financially and provide pension benefits.
The scheme was introduced in Budget 2024-25 and officially launched on September 18, 2024. Investments in this account remain active until the child turns 18, after which the account can be extended or other options can be chosen.
Key Changes in the Scheme
Higher Equity Allocation
Under the new rules, up to 75% of the NPS Vatsalya investment can now be invested in equities (the stock market).
This increases the chances of higher returns over the long term. Unlike traditional pension plans, which often provide low returns, this change aims to build a stronger fund for children’s future.
Partial Withdrawal Made Easier
After five years of investment, parents can make partial withdrawals for purposes like education, critical illness, or medical treatment.
Withdrawals can be up to 25% of the total contribution and can be done three times, making the scheme useful not only for retirement but also for temporary financial needs.
Options After the Child Turns 18
When the child reaches 18 years, they have multiple options:
Continue the account for three more years
Transfer it to a regular NPS account
Withdraw the funds
Upon withdrawal, up to 80% of the funds can be taken as a lump sum, while 20% must be invested in an annuity. If the total deposit is less than ₹8 lakh, the entire amount can be withdrawn at once.
