NPS: Open this account in the name of your child under this new scheme of Modi government, know its benefits
NPS: A new initiative by the government allows the establishment of NPS accounts for kids. Called NPS Vatsalya, the aim is to secure children’s financial future for as long as possible, or until they’re adults. Recognized guardians/parents can directly invest in NPS for their underage kids. This could be useful for those wanting to ensure their kids’ financial stability post retirement and save for their future.
Know what is the plan
It’s a specific NPS type crafted for youth. As part of it, parents/guardians can open an NPS account for their kids and contribute a set amount monthly or annually till they turn eighteen. This helps plan for their future education and retirement.
Only one NPS account should be held by the child
Previously, you needed to be between 18 and 70 to start a National Pension Plan. Now, NPS Vatsalya Yojana permits account setup for anyone under eighteen. Each child can open one account run by a parent/guardian till they turn eighteen.
Freedom to invest the money
When they reach eighteen, the Vatsalya account transfers to them. They can manage it themselves. Then, they can switch it to a standard NPS account and continue till they’re 75, if they wish. Or switch to a non-NPS account. Essentially, they have the freedom to invest the money elsewhere.
How much to invest?
Parents can contribute anything from Rs 500 monthly or up to Rs 1.50 lakh yearly in their kid’s NPS account. Upon turning eighteen, kids can withdraw all money from the NPS Vatsalya account. Or, they might qualify for a pension after reaching sixty. The benefits scale with the size of investment. For example, parents investing Rs 5,000 monthly would accumulate to Rs 60,000 yearly. The total would be Rs. 10.80 lakh when the child turns 18. With a 10% annual return, the profit could reach Rs. 19.47 lakhs, amassing a total of Rs. 30.27 lakhs. In an adult’s NPS, if maintained till sixty, it could accumulate Rs 36 lakh. A 10% return could yield a total of Rs 20.50 crore. An NPS can offer up to Rs 12 crore post retirement. Current norms demand an annuity plan purchase guaranteeing a pension of Rs 8 crore, promising a sizeable pension.
How to sign up?
The pension fund regulator PFRDA manages the long-term NPS program. Setting up an NPS account is pretty straightforward. Just go to the pension fund regulator eNPS’s website. Public and private banks offer this service.
These are the benefits of this scheme
1. A Vatsalya account can convert to a regular NPS at eighteen.
2. One can withdraw the entire amount without switching to a regular NPS.
3. The plan offers portability, ensuring the account stays the same even if jobs change.
4. Long-term maintenance can accumulate substantial amounts.
5. On retiring, sixty percent of the account funds can be withdrawn.
6. At retirement, part of the funds can be withdrawn tax-free.
