SDG 1: No Poverty | SDG 10: Reduced Inequalities
Pension Fund Regulatory and Development Authority (PFRDA) | Ministry of Finance
The Pension Fund Regulatory and Development Authority (PFRDA) has officially issued the NPS Vatsalya Scheme Guidelines 2025, providing a detailed operational framework for the pension scheme designed exclusively for minors. Announced in the Union Budget 2024-25 and launched on September 18, 2024, the scheme allows parents and legal guardians to systematically build long-term savings for their children from birth until age 18.
Operational Framework and Eligibility
Eligibility: The scheme is available to all Indian citizens, Non-Resident Indians (NRIs), and Overseas Citizens of India (OCIs) aged below 18 years.
Designation: NPS Vatsalya is defined as a “Specific Purpose Scheme” under PFRDA regulations, mandating a unique Permanent Retirement Account Number (PRAN) for each minor subscriber.
Contribution Requirements: The scheme requires a minimum initial and subsequent annual contribution of ₹250, with no upper limit on investment.
Investment and Withdrawal Norms
Asset Allocation: Guardians can select from multiple pension funds with indicative equity exposure limits between 50% and 75%.
Partial Withdrawals: After a three-year lock-in period, the scheme allows up to three partial withdrawals of 25% of contributions for education, medical treatment, or disability exceeding 75%.
Transition at Majority: Upon attaining 18 years of age, the account seamlessly shifts to the NPS-Tier I All Citizen Model. Exit options include taking 80% as a lump sum (with 20% annuity) or 100% withdrawal if the total corpus is less than ₹8 lakh.
What is a ‘Specific Purpose Scheme’ in the context of NPS Vatsalya? It is a regulatory classification under the PFRDA (Exit and Withdrawals under NPS) Regulations, 2015, which designates the scheme for a distinct objective—in this case, securing the financial future of minors. This classification allows the regulator to tailor specific rules for entry, partial withdrawal, and exit that differ from the standard NPS for adults. For example, it enables a mandatory and seamless transition to a normal NPS Tier-I account upon the minor attaining 18 years of age, ensuring that the benefit of long-term compounding remains uninterrupted.
Policy Relevance
NPS Vatsalya serves as a strategic instrument for creating a “pensioned society” by incentivizing early financial discipline and addressing intergenerational equity under the Viksit Bharat 2047 vision.
Strategic Impact for India:
Promoting Grassroots Enrolment: To reach rural areas, a targeted incentivization framework offers up to ₹100 per account to Anganwadi and ASHA workers for facilitating subscriber onboarding.
Long-Term Wealth Accumulation: By starting at birth, the scheme leverages the power of compounding over decades, potentially creating a substantial safety net that reduces future fiscal pressure on state-led social security.
Incentivizing Savings Culture: The inclusion of family and friends as permitted contributors allows the “gifting” of financial security, shifting social spending toward productive, long-term investments.
Financial Literacy: Introducing minors and their guardians to market-linked retirement products at an early age builds national competency in prudent financial management.
Relevant Question for Policy Stakeholders: How can PFRDA integrate NPS Vatsalya with the Jan Dhan-Adhaar-Mobile (JAM) trinity to achieve saturation-level coverage among rural and underprivileged households?
Follow the full update here: NPS Vatsalya Scheme Guidelines 2025