NPS Vatsalya to be launched on September 18, 2024: Eligibility, investment limit, partial withdrawal rule and more

Anyone who is a citizen of India can invest in NPS Vatsalya on behalf of their kids. The NPS Vatsalya account should be opened in the name of the minor. However, the minor will have an option to continue it as an adult.
The guardian of a minor will also be eligible to open NPS Vatsalya account.

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Parents can choose any one of the pension funds registered with PFRDA while investing in NPS Vatsalya. Here are the four investment choices under NPS Vatsalya, according to ​the website of Central Bank of India.

a) Default Choice: Moderate Life Cycle Fund – LC-50 (50% equity).
b) Auto Choice: Guardian can choose Life Cycle Fund – Aggressive – LC-75 (75% equity), Moderate LC-50 (50% equity), or Conservative LC-25 (25% equity).
c) Active Choice: Guardian actively decides the allocation of funds across equity (up to 75%), corporate debt (up to 100%), government securities (up to 100%), and alternate assets (up to 5%).

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Under NPS Vatsalya, the minimum contribution will be Rs 1000 per year. There is no limit on maximum contribution, according to the website of Central Bank of India.

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A partial withdrawal option will be available after three years of opening the NPS Vatsalya account. Up to 25% of the corpus can be partially withdrawn for the purposes of education, treatment of specified illnesses, disability of more than 75%, etc., as specified by PFRDA, according to the SBI Pension Fund website. The partial withdrawal option can be availed three times till the subscriber turns 18, according to the SBI Pension Funds website.

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The subscribers can exit the NPS Vatsalya scheme when they turn 18. If the total corpus is less than or equal to Rs 2.5 lakh, the entire corpus can be withdrawn as a lumpsum. If the corpus is more than Rs 2.5 lakh, the subscriber can withdraw 20% as a lump sum and use 80% of the corpus to purchase an annuity for regular income, according to the website of Central Bank of India.

The subscriber will also have the option to continue the NPS Vatsalya account beyond the age of 18 years. The NPS Vatsalya account will be converted into a regular NPS Tier – I (All Citizen). A fresh KYC of minor will be required within three months of turning 18, according to the SBI Pension Funds website.

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