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In the Union Budget 2024, the Finance Minister Nirmala Sitharaman has proposed introduction of a new NPS scheme for minors – NPS Vatsalya.
The scheme will enable parents and guardians to open NPS account and make contribution on behalf of their children. Once the minor attains majority, his/her NPS Vatsalya account will be converted into a regular NPS account.
Since partial withdrawal is allowed in NPS, the minor turned major can use a portion of the accumulated corpus to fund his/her higher education.
Rahul Bhagat, CEO at DSP Pension Fund Managers feels that the NPS Vatsalya will inculcate investment habits among children. He said, “Under this scheme, parents can open and manage investment accounts on behalf of their minors, ensuring a structured approach to savings and investments. This not only instils a sense of financial discipline from a young age but also sets the stage for robust financial planning as children grow into adulthood. In essence, the NPS Vatsalaya scheme represents a forward-thinking approach by the government to empower families with the means to plan for their children's futures responsibly. It encourages savings and investment habits that will undoubtedly benefit our society as a whole in the long run."
Sumit Shukla, MD and CEO, Axis Pension Fund said that parents and guardian can secure children’s future through this scheme. “Considering the low cost of nature of NPS, this scheme can do wonders for children in the long term. Also, parents and guardians can do SIP for their children in NPS Vatsalya.”