NPS Vatsalya Scheme Explained: How Parents Can Secure Their Child’s Retirement with a Pension Account Before 18

The NPS Vatsalya Scheme is a newly introduced savings-cum-pension initiative aimed at helping parents and guardians build long-term financial security for their children. Announced by the Union Finance Minister in the Union Budget 2024–25, this scheme allows contributions to be made in the name of a minor, which later transitions seamlessly into a regular National Pension System (NPS) account once the child turns 18.

Regulated by the Pension Fund Regulatory and Development Authority (PFRDA), NPS Vatsalya is designed to promote early financial planning, disciplined investing, and retirement awareness from a young age.

What Is NPS Vatsalya Scheme?

NPS Vatsalya is a pension-focused investment scheme for minors, where parents or legal guardians can open and operate an NPS account on behalf of their child. Contributions can be made monthly or annually until the child attains the age of 18.

Once the subscriber turns 18, the account is automatically converted into a standard NPS Tier-I (All Citizen) account, ensuring continuity without the need to close or reopen the account.

Minimum Contribution and Investment Flexibility

One of the key strengths of the NPS Vatsalya Scheme is its affordability and flexibility:

• Minimum contribution: ₹1,000 per year

• Maximum contribution: No upper limit

• Account opening contribution: Minimum ₹1,000

This structure allows families from different income levels to participate while also giving higher-income parents the freedom to invest more for long-term wealth creation.

Investment Options Under NPS Vatsalya

Parents and guardians can choose from multiple investment strategies based on their risk appetite:

Default Option

• Moderate Lifecycle Fund (LC-50):
  Invests up to 50% in equity, offering a balanced growth approach.

Auto Choice Options

• Aggressive Lifecycle Fund (LC-75): Up to 75% equity

• Moderate Lifecycle Fund (LC-50): Up to 50% equity

• Conservative Lifecycle Fund (LC-25): Up to 25% equity

These options automatically adjust asset allocation as the child grows older.

Active Choice Option

Guardians can actively decide how funds are allocated:

• Equity: up to 75%

• Government securities: up to 100%

• Corporate debt: up to 100%

• Alternative assets: up to 5%

This flexibility allows customized portfolio planning aligned with long-term goals.

What Happens When the Child Turns 18?

Upon attaining 18 years of age:

• The account is converted into an NPS Tier-I account

• Fresh KYC of the subscriber must be completed within three months

• The subscriber gains full control of the account

This transition ensures uninterrupted investment and compounding benefits.

Withdrawal and Exit Rules

The scheme provides limited liquidity before maturity while maintaining its retirement focus:

• Partial withdrawal:
  Up to 25% of the subscriber’s contribution (excluding returns)
  Allowed after 3 years from account opening
  Permitted for education, specified medical treatment, disability over 75%, or other PFRDA-approved reasons
  Maximum three withdrawals before age 18

• In case of minor’s death:
  Entire accumulated pension wealth is paid to the guardian

• Exit at 18 years:
  At least 80% of the corpus must be used to purchase an annuity
  Remaining 20% can be withdrawn as a lump sum
  If the total corpus is ₹2.5 lakh or less, or annuity is unavailable, full withdrawal is allowed

All exits and withdrawals are governed by PFRDA regulations.

Eligibility Criteria

• The subscriber must be a minor Indian citizen

• Account must be opened and operated by a natural or legally appointed guardian

• Court-appointed guardians must submit legal proof

• Guardian must comply with PFRDA KYC norms

NRIs and OCI subscribers may also be eligible, subject to document requirements.

How to Apply for NPS Vatsalya

Online Application Steps

1. Visit the official NPS Trust website

2. Select “Open NPS Vatsalya”

3. Choose one of the three Central Recordkeeping Agencies (CRAs)

4. Enter minor and guardian details and complete OTP verification

5. Upload minor’s date of birth proof

6. Complete FATCA declaration and select investment option

7. Make the initial contribution of at least ₹1,000

8. PRAN (Permanent Retirement Account Number) is generated after successful payment

Offline application is also available through authorized points of presence.

Documents Required

• Aadhaar, PAN, or Driving License of the guardian

• Proof of minor’s date of birth (birth certificate, school certificate, passport, etc.)

• Guardian’s signature

• Additional documents for NRI/OCI subscribers, if applicable

Why NPS Vatsalya Is Important

NPS Vatsalya offers more than just financial returns. It helps instill financial discipline, encourages long-term investing, and provides a strong retirement foundation from an early age. With market-linked growth, professional fund management, and regulatory oversight, the scheme is a powerful tool for parents who want to secure their child’s financial future.

By combining flexibility, safety, and long-term benefits, NPS Vatsalya emerges as a forward-looking initiative that aligns savings with life-long financial planning.