What’s in the news?

• The Government of India has launched NPS Vatsalya, a contributory pension scheme that allows parents or guardians to invest on behalf of their minor children. 

About NPS Vatsalya

• NPS Vatsalya is an extension of the existing National Pension Scheme which would allow parents to open pension accounts for their minor children. 
• Under the scheme, parents can invest a minimum of ₹1,000 per month with no upper limit.
• Parents have the flexibility to select from a variety of Pension Funds registered with the Pension Fund Regulatory and Development Authority (PFRDA) for managing the investments.
• The scheme is designed to be operated by parents until the child reaches 18, at which point the account transitions into the child’s name. 
• Upon reaching adulthood, the account can be converted into a regular NPS account or another non-NPS scheme. 
• The scheme will be run under the Pension Fund Regulatory and Development Authority (PFRDA) and Permanent Retirement Account Number (PRAN) cards will be issued to newly registered minor subscribers.

Eligibility criteria:

• The child must be under 18;
• Both the child and the parent/guardian must be Indian citizens; 
• All parties must comply with the Know Your Customer (KYC) requirements.

Withdrawal process:

• Following a three-year lock-in period, a maximum of three withdrawals of up to 25% of contributions are allowed for reasons including education, a specific disease, or a handicap. 
• If the amount invested surpasses ₹2.5 lakh at the age of 18, 80% of it is used to purchase an annuity, and the remaining 20% can be taken as a lump payment. A lump sum withdrawal of the full capital is possible if it is less than or equal to ₹2.5 lakh.