Invest Rs.1000 and Get Rs.2.3 Crore Retirement Fund with Rs.1 Lakh Pension
By Team CodeForBanks | May 5, 2025
As parents, you will want a secured future for your child. One aspect of a secured future is availability of finances. We are talking of a program called NPS Vatsalya Scheme that can be used to secure a substantial amount of fund for use by your children post their retirement. One of the perks of this scheme is that by investing a mere Rs.1000 per year, you can make up Rs.2.3 crore retirement fund for the children along with a pension of Rs.1 lakh. Read further to know how.
NPS Vatsalya Scheme – What is it? How Does it Work?
The scheme was launched by the government of India in 2024 Union Budget. It can be used by parents to provide a stable financial future for their child by helping him/her plan for retirement.
- NPS Vatsalya scheme involves creation of an NPS account for the children and contribution to that account till the child reaches 18 years of age. The contribution starts with Rs.1000 per year.
- The contributions get funded through all market-associated options. This helps the funds to grow continuously.
- The guardian can choose from any of the funds registered with PFRDA for investment. They can choose from Moderate, Active choice or Auto choice of investment.
- As the child turns 18, the account automatically transforms into an NPS account for the child to take charge of his/her savings. S/he can also now make contributions to it independently, or use the funds to purchase annuity for periodic income upon retirement, or even cash out the funds entirely.
Benefits of NPS Vatsalya Scheme
- Provides children a safe way to save for retirement.
- Helps children with a stable financial future.
- Provides tax-related advantages under Section 80C and Section 80CCD (1B).
- Low minimum contributions plus a variety of investment possibilities.
- A government-sponsored program assuring security of funds.
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How to Open NPS Vatsalya Account (Eligibility and Documents Required)
Regarding the eligibility criteria, the child should be below 18 years of age. The parents or legal guardians are the only people allowed to open such account on behalf of their minor child.
Steps to Open the Account
Here are the steps to open the account:
- Step 1: Choose a Central Recordkeeping Agency (CRA).
- Step 2: Complete the online registration form to create an NPS account.
- Step 3: Make an initial payment of at least Rs. 1000.
- Step 4: Provide supporting documentation.
- Step 5: A special PRAN number will be given to you.
- Step 6: After a day, you will receive a login ID to see and access your account information.
Documentation Needed
Documents required are as follows:
- Identity and Address Proof of the Parent/Guardian
- Minor's Birth Date Proof
- Minor's Birth Date Proof
These are required for KYC. Any of the documents like Aadhaar, NREGA Job Card, Driving License, Passport, Voter ID card, National Population Register can be submitted.
Any of the documents from Birth certificate, School leaving certificate, PAN, Highschool Certificate, or Passport can be submitted.
If the guardian is an NRI, then the NRE/NRO Bank Account (solo or joint) of the minor is required.
NPS Vatsalya Withdrawal
Below is a table showing the withdrawal details pertaining to an NPS Vatsalya account:
| Before Turning 18 | After Turning 18 |
|---|---|
| Partial Withdrawals (After 3 years) | Account Conversion |
| Up to 25% of the contributed amount can be withdrawn. | Account is converted to a regular All Citizen NPS account. |
| Withdrawals can be made for education, medical treatment, or severe disability (≥ 75%), as specified by PFRDA. | Subscriber must complete fresh KYC within 3 months of turning 18. |
| Withdrawals are allowed up to three times before turning 18. | Subscriber can exit NPS and re-invest at least 80% of the corpus in an annuity plan. |
| The remaining 20% can be withdrawn as a lump sum. | |
| If the corpus is ≤ Rs.2.5 lakh, the entire amount can be withdrawn as a lump sum. |
NPS Vatsalya - Invest Rs.1000, Secure Rs.2.3 Crore Retirement Fund
Coming to the perk mentioned in the beginning, here's how you can end up saving a sum of Rs.2.3 crore as retirement fund for the child with Rs.1 lakh as pension:
Suppose you open your child's NPS Vatsalya account at his/her birth and invest Rs.1000/month in it till the child reaches an age of 18.
Now, upon turning 18, your child can invest Rs.1000 every month in this scheme from the 19th year to the age of 60.
The total investment till 60 years of his/her age will be Rs.7,20,000.
For instance, let's suppose s/he gets a return of 10% on this, then s/he will get Rs.3,77,61,849 as interest and the total corpus will be Rs.3,84,81,849.
In NPS, you need to invest at least 40% of your amount in annuity. So, if the child invests 40% in annuity, then s/he will have to invest Rs.1,53,92,740 in annuity. In this case, s/he will get Rs.2,30,89,109 as retirement fund. Again, if the annuity gives a return of 8%, then Rs.1,02,618 will be received every month as pension.
Clearly, the NPS Vatsalya Scheme can help one substantially when one adheres to open and maintain the account for the retirement period.
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