NPS Latest Updates: Under NPS Vatsalya, the government has allowed opening of NPS account in the name of children as well. Through this, it will be possible for parents or guardians to plan career and pension for their children.
NPS Latest Updates: In the budget, the government has allowed opening NPS accounts in the name of children as well. This scheme has been named NPS Vatsalya. Its objective is to provide a stable financial future to children on reaching adulthood or for a long time. Under this, parents and guardians can invest directly in NPS in the name of their minor children. This scheme can prove to be good for those who want to save for the future of their children and want to give them financial security after retirement.
What is the scheme
This is a variant of the existing NPS, specially designed for young individuals. Under this scheme, parents and guardians can open an NPS account for their children and contribute a fixed amount every month or year until the child turns 18. Through this, it will be possible for parents or guardians to plan career and pension for their children.
Only one account will be opened in the name of a child
Till now, the age between 18 and 70 years was a mandatory condition for opening the National Pension Scheme (NPS). But now, accounts can be opened in the NPS Vatsalya Yojana for people below 18 years of age. Only one account can be opened for a child. The parents or guardians will operate it until the child turns 18.
These options will be available when the child becomes an adult
On completion of 18 years, the Vatsalya account will be transferred to the concerned adult. That is, he will be able to operate it himself. After this, if he wants, he can convert it into a normal NPS account and continue it till the age of 75 years. Or he can convert it into non-NPS. That is, the amount of the fund can be invested in any other scheme.
Invest as per choice
Parents can deposit a minimum of Rs 500 per month or a maximum of Rs 1.50 lakh per year in the child’s NPS account. The child can withdraw the entire amount from his NPS Vatsalya account on attaining the age of 18 years. Or can get pension on attaining the age of 60 years.
The longer the investment, the stronger the return
According to experts, if a parent invests Rs 5,000 per month in this account, it will be Rs 60,000 annually. This investment will be Rs 10.80 lakh when the child is 18 years old. Now if an annual return of 10% is considered, the profit will be Rs 19.47 lakh. Thus, it is possible to accumulate a total fund of Rs 30.27 lakh.
If the adult continues this NPS account, then by the age of 60, Rs 36 lakh will be deposited in the account. Considering a 10% return, the total fund can be Rs 20.50 crore. On retirement, one can potentially get Rs 12 crore from the NPS account. As per the current rules, an annuity plan has to be purchased with a pension of Rs eight crore. It is certain that this amount will ensure a significant monthly pension.
How to open an account
NPS is a long term investment scheme, which is managed by the pension fund regulator PFRDA. The process of opening an NPS account is straightforward. You can open this account on the website of the pension fund regulator eNPS. All government and private banks also provide this facility.
This is why this scheme is beneficial
1. On completion of 18 years, NPS Vatsalya account can be converted into a normal NPS account.
2. The entire amount can also be withdrawn without converting it into a normal NPS account.
3. This scheme provides portability i.e. the account will not change even if you change jobs.
4. A large amount will be accumulated if the account is continued for a long period.
5. At the time of retirement, a person can withdraw 60% of the amount deposited in the account.
6. A part of the fund can be withdrawn without tax at the time of retirement.
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