NPS Vatsalya Scheme

Why in News?

The Pension Fund Regulatory and Development Authority (PFRDA) has issued the NPS Vatsalya Scheme Guidelines, 2025, operationalising a new contributory pension framework aimed exclusively at minors, with the objective of strengthening long-term financial security from an early age.

Background: Expanding Pension Coverage in India

• India’s pension landscape has traditionally focused on formal sector employees, leaving large sections of the population under-covered.
• Schemes such as National Pension System (NPS) and Atal Pension Yojana have expanded coverage, but long-term savings often begin late in life.
• Recognising the benefits of early financial planning, PFRDA has introduced a pension-oriented savings scheme specifically designed for children, allowing compounding benefits over decades.

What is the NPS Vatsalya Scheme?

• NPS Vatsalya is a contributory savings and long-term financial security scheme designed exclusively for minors.
• It operates under the broader architecture of the National Pension System (NPS) and is regulated by PFRDA.
• The scheme enables guardians to create a pension corpus in the name of a child, ensuring early entry into formal retirement savings.

Key Features of the NPS Vatsalya Scheme

Eligibility and Account Operation

• Open to all Indian citizens, including NRI and OCI minors, below 18 years of age.
• The account is opened in the name of the minor and operated by a guardian until the child attains adulthood.

Contributions

• Minimum initial and annual contribution: ₹250
• No maximum limit on contributions
• Contributions may also be gifted by relatives or friends, promoting family-supported savings.

Pension Fund Selection

• The guardian can choose any one pension fund registered with PFRDA, offering flexibility in fund management.

Partial Withdrawal and Flexibility Provisions

• Partial withdrawal is permitted after completion of three years from the date of account opening.
• Up to 25% of the minor’s own contributions (excluding returns) can be withdrawn.
• Withdrawals are allowed for specific purposes such as:
  • Education
  • Medical treatment
  • Specified disabilities
• Withdrawal frequency:
  • Twice before attaining 18 years
  • Twice between 18 and 21 years, subject to conditions

These provisions balance long-term savings discipline with flexibility for essential life needs.

Significance and Way Forward

• NPS Vatsalya promotes a culture of early financial planning, leveraging long-term compounding to build retirement security.
• It strengthens financial inclusion by integrating minors into India’s formal pension ecosystem.
• The scheme complements broader pension reforms aimed at widening coverage beyond employment-based models.
• For effective uptake, awareness campaigns, digital onboarding, and integration with existing child-focused financial products will be essential.