When it comes to their children, one of the most important goals for parents is the security of the future of their loved ones. At times, reaching this goal can be difficult, due to inflation and other national and international events contributing to a sense of uncertainty of life. To help parents in such situations, the government launched the NPS Vatsalya Scheme in the Union Budget of 2024. The scheme is aimed at helping parents set up retirement benefits for minors.
Let’s understand the details about the scheme and how you can utilise it to plan your child’s future.
Features of the NPS Vatsalya Scheme
The NPS Vatsalya Scheme comes with certain benefits that can help you instil a layer of security in your child’s future:
1. Life Insurance:
The National Pension System Vatsalya Scheme comes with a life insurance component. It can protect the minor’s family if something were to happen to their legal guardian during a specified period.
2. Payouts:
When the minor reaches the age of 18, the scheme starts paying them pre-specified amounts. NPS stands for National Pension System. The scheme will then function in the same manner as conventional pension plans Via the NPS option, the scheme creates a retirement fund for the child’s future. With a transition into a regular NPS account, after turning 18, the minor can deal with an investment model their parents and legal guardians are already familiar and comfortable with. The minor can choose to receive the money via the pension option or choose to withdraw it directly.
3. Systematic Planning:
The scheme demands that regular contributions be made to it for availing of the benefits in the future. The contributions can be made via periodic payments, or via a lumpsum transfer of money. Having to make regular contributions to a scheme calls for a certain level of financial planning, which is a good habit to inculcate.
4. Sense of Responsibility:
The NPS Vatsalya Scheme turning into a regular NPS account after the minor turns 18, can introduce them to concepts such as retirement planning and financial responsibility. Knowing such things at a young age can help them become more aware of their finances and make more informed decisions in the years to come.
5. Market-linked growth:
The funds in the National Pension System Vatsalya Scheme are invested in options connected to markets. A combination of debt and equity funds can lead to greater returns (in comparison to more traditional options not linked to the market).
Via a scheme targeted solely towards minors, the government can succeed in its efforts to instil in children a sense of financial responsibility.
NPS Vatsalya Scheme Eligibility
Any Indian citizen legally recognised as a minor is eligible for the NPS Vatsalya Scheme. Non-Resident Indians (NRIs) below the age of 18 are also eligible.
The opening of the account can be done by the parents or legal guardians of the minor. They can also manage the account on behalf of the minor.
The account will be in the name of the minor and they will be the sole beneficiary of the account. They can start operating it once they turn 18. The parents or legal guardians can be the nominees in the account.
How to Apply for the National Pension System Vatsalya Scheme
An account with the NPS Vatsalya Scheme can be opened via POPs. The term stands for Points of Presence. These POPs are affiliated with the PFRDA, which stands for the Pension Fund Regulatory and Development Authority. The POPs include banks, pension plan funds, and India Post. The NPS Vatsalya account can be set up online or via a visit to one of the POPs. To open an account online, the eNPS platform set up by the NPS trust can be accessed. For a complete and detailed list of POPs, one can visit the PFRDA website.
The account can be opened by following the steps below:
- Load the homepage of the eNPS website in a web browser
- Scroll down below to click on the ‘Register Now’ option which will be under the ‘NPS Vatsalya (Minors)’ tab
- Fill in the required details of the guardian (such as date of birth, contact number, PAN number, and email ID)
- Click on ‘Begin Registration
- Wait for a One Time Password that will be received on the guardian's mobile number and email
- Enter the received One Time Password and wait for verification
- Once verified, you will be able to see an acknowledgement number on the screen
- Click on ‘Continue’
- Fill in the details of the minor and the guardian/parent
- Upload the required documents
- Click on ‘Confirm’
- Pay the initial contribution of Rs.1,000
- Complete the process with dual OTP or eSign authentication.
If you follow the above steps correctly, the PRAN will be generated and the NPS Vatsalya account will be registered in the name of the minor. With a lot of processes and tools being online in today’s times, you can also use a retirement planning calculator when opening an account. It’s an online tool that calculates savings and returns on the basis of the different details added about an individual and their finances. The NPS Vatsalya Scheme has a variety of investment choices that can give them returns in the long term. It also comes with a financial coverage benefit similar to a life insurance policy.
The National Pension System Vatsalya Scheme can be said to be a significant step towards creating a layer of financial security for individuals at an early age. With investments planned according to their personal risk preferences, the parents and the legal guardians of the minors can ensure that the returns are assured up to a certain extent and not missing out on any opportunity for growth. With the help of an online retirement planning calculator, parents and guardians can also get a good understanding of how this scheme will turn out in the future. Eventually, via the National Pension System Vatsalya and other schemes, all citizens of the country should be able to lead more financially comfortable lives.
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