NPS Vatsalya Scheme: Modi government has launched NPS Vatsalya Yojana with the aim of securing the future of the country’s children. Under which parents and guardians can invest for the better financial future of their children. In this scheme, parents can open NPS Vatsalya account in the name of children. The National Pension Scheme (NPS) has been expanded through this scheme.
Like NPS, NPS Vatsalya Yojana will also be managed by the Pension Fund Regulatory and Development Authority (PFRDA).
Can exit once the child turns 18
When the child turns 18, the Vatsalya account can be converted into a regular NPS account. At the same time, when the child turns 18, the parents can opt out of this scheme if they wish. But the condition is that to buy an annuity plan, at least 80% of the maturity amount will have to be reinvested and only 20% of the amount can be withdrawn in lump sum.
How much to invest in NPS Vatsalya?
Parents or guardians have to invest at least Rs 1,000 annually in the NPS Vatsalya Scheme. There is no upper limit to invest in this, they can invest as much as they want in this scheme. Therefore, parents will have the flexibility to start with a small amount and increase the investment amount as their child grows.
If you want to avail the benefits of NPS Vatsalya Yojana, then for this you must be a citizen of India and your child’s age should be less than 18 years. Additionally, it is also necessary for all parties involved to fulfill KYC requirements.
Benefits of NPS Vatsalya
If we talk about the special benefits of NPS Vatsalya, then this scheme provides long-term financial planning and security for your child and also emphasizes on the concept of early initiation of pension planning. This savings scheme will also promote the habit of saving and investing among parents.
NPS Vatsalya Yojana can also help in reducing the burden of financial responsibility of parents in future. Because its maturity amount can be used for their child’s higher education or starting a business.
nps vatsalya withdrawal
In some cases, some money can be withdrawn from the NPS Vatsalya account before your child turns 18. After three years of enrolment, you can withdraw up to 25% of the total contribution amount, giving you the facility to withdraw the money three times till the child attains adulthood. As per PFRDA guidelines, 25% of the corpus can be withdrawn for education, treatment of serious illnesses or in case of disability more than 75%.
When the child turns 18, this account will convert into a regular NPS account. Therefore, fresh KYC will have to be completed within three months. Subscribers can exit NPS, but the condition is that at least 80% of the corpus has to be reinvested in the annuity plan, while 20% can be withdrawn in lump sum. If the total amount is less than Rs 2.5 lakh, the entire amount can be withdrawn in one go.
Create a big retirement fund for your child with NPS Vatsalya Yojana
Let us learn how investing in NPS Vatsalya Yojana can help you accumulate a huge sum of money for your child by the time he or she turns 18.
Calculation:
Suppose you invest Rs 1,000 per month under this scheme for your child.
Investment Period: 18 years
Annual Returns: 12.86%
Total amount invested in 18 years: Rs 2,16,000 (Rs 1,000 per month x 12 months x 18 years)
Total interest earned on: Rs 6,32,718
Total amount at age 18: Approximately Rs 8,48,000
Historical Average Returns: This rate of 12.86% reflects the historical average since the inception of the NPS, which includes a portfolio allocation of 75% in equities and 25% in government securities (G-Secs) till July 19, 2024.
As per NPS Vatsalya rules, 80% of the maturity amount (Rs 6,78,400) must be mandatorily reinvested in the annuity plan, which means only 20% (Rs 1,69,600) can be withdrawn as a lump sum.
This is how you will get Rs 11 crore on retirement
Here’s how an investment of Rs 10,000 every year for 18 years could grow under different rates of return (ROR) (Source: SBI Pension Fund website)
– At the age of 18: With 10% RoR, the deposit amount will be around Rs 5 lakh.
– At the age of 60: If the same investments are continued till retirement, the fund can grow to Rs 2.75 crore by July 19, 2024 at 10% RoR and Rs 5.97 crore at a historical average return of 11.59%, which is composed of 50% equity, 30% corporate debt and 20% equity. % represents allocation to government securities.
– With RoR of 12.86%, this annual investment of Rs 10,000 would grow to Rs 11.05 crore based on a portfolio allocation of 75% equities and 25% government securities.
