NPS Vatsalya calculator: ₹10,000 annual investment can make your child a crorepati. Here’s how

NPS Vatsalya is a new initiative within the National Pension System dedicated to securing the financial future of children. Union Finance Minister Nirmala Sitharaman launched the NPS Vatsalya Yojana, which was announced in the July Budget 2024, on Wednesday, September 18. It will be managed under the Pension Fund Regulatory and Development Authority (PFRDA).

"Through this route, parents/guardians can build a retirement corpus for their children from their childhood upto the age of 18. The account is opened in the name of the minor and operated by Guardian, and the minor is the sole beneficiary of the same," said Kurian Jose, CEO, of Tata Pension Management

NPS Vatsalya Eligibility

All minors (individuals up to 18 years of age) are eligible to participate in the NPS Vatsalya scheme.

NPS Vatsalya Contribution

To open a Vatsalya account, you must make a minimum initial contribution of ₹1,000, followed by annual contributions of ₹1,000.

How to open an NPS Vatsalya Account

Parents can open the account at registered points of presence, such as banks, post offices, and pension funds, either online or in person. The process can also be completed through the NPS Trust's eNPS platform. Several banks, including ICICI Bank and Axis Bank, have partnered with the PFRDA to facilitate the NPS Vatsalya initiative.

Transition After Turning 18

According to the PFRDA, once the child turns 18, the account will automatically convert to a regular NPS Tier I account. This transition allows for a seamless shift to the NPS Tier I (All Citizen) plan, enabling all investment features, including Auto Choice and Active Choice. By promoting early investment and structured savings, NPS Vatsalya aims to create a solid financial foundation for young individuals. Kurian Jose, CEO of Tata Pension Management, emphasizes that this approach instils disciplined saving and compounding benefits and nurtures financial responsibility from an early age.

Returns on NPS

Nirmala Sitharaman noted that NPS has yielded returns of 14% in equity, 9.1% in corporate debt, and 8.8% in government securities.

NPS Vatsalya Calculator

If parents make an annual contribution of ₹10,000 for 18 years. By the end of this period, at an expected rate of return (RoR) of 10%, the investment is projected to grow into a corpus of approximately ₹5 lakh. If the investment continues until the investor reaches the age of 60, the expected corpus can vary significantly based on different rates of return. At 10% RoR, the corpus could reach around ₹2.75 crore.

If the returns improve to an average of 11.59%—based on a typical NPS allocation of 50% in equity, 30% in corporate debt, and 20% in government securities—the expected amount could rise to about ₹5.97 crore. Furthermore, with a higher average return of 12.86% (derived from a portfolio allocation of 75% in equity and 25% in government securities), the corpus could reach ₹11.05 crore. It is important to note that these figures are for illustrative purposes only, based on historical data, and actual returns may vary.

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