The Pension Fund Regulatory and Development Authority (PFRDA) has introduced major changes to the NPS Vatsalya scheme for children.
Pension funds can now invest up to 100% in equities, giving them more flexibility to grow the money over the long term.
In addition, pension funds will receive limited information about children’s accounts, such as the parents’ details, the child’s gender, the deposit method, the state or region, male-female ratio,
and the way contributions are made. These changes aim to make the scheme more integrated and to help children’s savings grow better over time.
This circular was issued on February 23, 2026, and has been shared with all pension funds and stakeholders linked to the NPS.
Greater Flexibility in Investments
Under Paragraph 12 of the NPS Vatsalya Yojana Guidelines, 2025, pension funds can now choose their own investment strategies as long as they stay within the prescribed limits.
Funds can either:
Follow the general asset allocation set by PFRDA, with no minimum requirement in any category, or
Design their own strategy to manage investments.
This means that investment approaches and performance may vary between different pension funds.
Benefits of Sharing Data
By sharing selected data, pension funds can plan better investment strategies and monitor accounts more efficiently.
The shared information includes details about parents, gender of the child, contribution methods, region, and male-female ratio. This data allows pension funds to make informed decisions for better long-term growth.
Higher Risk, Higher Potential Returns
Investing more in equities can offer better compounding over 15–20 years, especially for younger children. However, it also comes with short-term market risks.
Experts suggest this approach is suitable for:
Parents with a long-term investment horizon of 50–60 years
Those with a higher risk appetite
Even a 1–2% difference in annual returns can have a significant impact over several decades.
Purpose of the New Rules
PFRDA states that these rules are designed to:
Allow pension funds to formulate data-driven strategies
Promote the scheme and increase enrollment
Strengthen the NPS legacy over time
Enhance transparency and protect subscribers
Pension funds or intermediaries violating these rules may face regulatory action.
