NPS Vatsalya About 9,700 minor subscribers have joined the scheme on the first day of its launch. The scheme was launched this week. Regulated by the Pension Fund Regulatory and Development Authority (PFRDA), the scheme offers parents and guardians an opportunity to start saving early for their children’s retirement using the power of interest on interest. It is a milestone in India’s emerging pension landscape. Finance Minister Nirmala Sitharaman officially launched the NPS Vatsalya scheme on September 18. It was announced in the Union Budget 2024-25. PFRDA said in a statement on Friday that NPS Vatsalya received a good response on the first day of the offer. 9,705 minor subscribers joined the scheme through various Points of Presence (POPs) and e-NPS portal. Out of this, 2,197 accounts were opened through the e-NPS portal.
There are 3 options for investment here
Parents can choose any pension fund for their child which is registered with PFRDA. There are 3 options available for investment under this scheme-
1. Active Choice: In this option, parents can invest funds up to 75 per cent in equity or up to 100 per cent in corporate debt or up to 100 per cent in government bonds or up to 5 per cent in other assets.
2. Auto Choice : In this option, parents can invest the amount as per their wish in different life cycles i.e. LC. In this, parents can choose LC-75 (aggressive), in which 75% amount will go in equity. In LC-50 (moderate), 50% and in LC-25 (conservative), 25% amount will go in equity.
3. Default Choice: In this option, 50 percent of the amount invested will go into equity.
In this way a fund of Rs 11.05 crore will be created
If parents contribute Rs 10,000 annually to their child’s NPS Vatsalya account for 18 years, a fund of Rs 5 lakh will be accumulated at an estimated return of 10%. If this investment continues till the investor turns 60 years of age, a fund of Rs 2.75 crore will be accumulated based on a 10% return. This amount can be very helpful in retirement planning. If we assume an average return of 11.59% based on 50% NPS allocation to equity, 30% allocation to corporate debt and 20% allocation to government securities, a fund of Rs 5.97 crore will be accumulated. If we assume a higher average return of 12.86% based on 75% NPS allocation to equity and 25% allocation to government securities, this investment will accumulate a fund of Rs 11.05 crore by the time the investor turns 60.
