Government Launches NPS Vatsalya Yojana to Secure Children’s Retirement Future

 

Government Launches NPS Vatsalya Yojana to Secure Children’s Retirement Future

New Delhi:
In a significant step towards strengthening long-term social security, the Government of India has introduced the NPS Vatsalya Yojana under the National Pension System (NPS). The scheme enables parents and legal guardians to open a pension account in the name of their minor children, ensuring early and disciplined retirement planning.

According to officials, the initiative is aimed at building a strong financial foundation for children by leveraging long-term investments and the power of compounding.

What is NPS Vatsalya Yojana?

NPS Vatsalya Yojana is a contributory pension scheme for children below 18 years of age. The account is operated by parents or guardians until the child attains adulthood. Upon turning 18, the account is automatically converted into a regular NPS account, allowing uninterrupted continuation of retirement savings.

Investment Structure and Regulation

Funds invested under the scheme are allocated across:

• Equity instruments

• Corporate bonds

• Government securities

The scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), ensuring transparency, safety, and investor protection.

Returns and Expert Views

Financial experts estimate that NPS Vatsalya Yojana may generate average long-term returns of 8–10 per cent, depending on asset allocation and market conditions.

While these returns may be slightly lower than those offered by equity-oriented mutual funds, which can deliver 10–12 per cent over long periods, experts emphasize that the objective of NPS is not aggressive wealth creation but assured retirement security.

How Is It Different from Mutual Funds?

Market analysts point out that mutual funds offer greater liquidity and flexibility, making them suitable for medium- and long-term wealth creation. However, NPS Vatsalya Yojana imposes withdrawal restrictions, ensuring that the accumulated corpus remains largely intact for retirement.

Experts suggest that a combination of mutual funds and NPS Vatsalya Yojana can provide a balanced approach—growth through market-linked investments and stability through disciplined pension planning.

Eligibility and Account Opening

The scheme is open to all Indian citizens below 18 years of age. Accounts can be opened through:

• Banks

• Post offices

• Authorized NPS Points of Presence

• Online NPS platforms

KYC documentation of both the child and the guardian is mandatory.

Conclusion

Experts believe that NPS Vatsalya Yojana is a forward-looking initiative that encourages parents to plan for their children’s financial independence well in advance. When used alongside mutual fund investments, the scheme can play a crucial role in ensuring long-term retirement security for the next generation.