Union Finance Minister Nirmala Sitharaman launched the National Pension System (NPS) Vatsalya scheme on September 18.

Highlights of NPS Vatsalya:

• NPS Vatsalya was announced in the 2024-25 Budget presented in July.

• It is envisaged that NPS Vatsalya scheme will inculcate the habit of savings among young subscribers.

• It allows parents to save for their children's future by investing in a pension account.

• It is a contributory pension scheme regulated and administered by Pension Fund Regulatory and Development Authority (PFRDA) designed specifically for all Indian minor citizens.

• Parents can subscribe to NPS Vatsalya online or by visiting a bank or post office. 

• The minimum contribution to open a Vatsalya account is Rs 1,000 annually. There is no limit on the maximum contribution.

• Children below the age of 18 years can open an NPS Vatsalya account, which will automatically get converted to a regular NPS account on completion of 18 years of age. Pension will come from the account only upon attainment of 60 years of age.

• The guidelines for withdrawal from NPS accounts are being finalised.

• Many lenders, including ICICI Bank and Axis Bank, have joined hands with the PFRDA to launch NPS Vatsalya.

What is PFRDA?

• PFRDA is a statutory regulatory body established by an Act of Parliament with the charter to promote, develop and regulate the pension sector in India.

• The Pension Fund Regulatory & Development Authority Act was passed in September 2013 and notified in February 2014.

• The Act provides for an overarching mandate to PFRDA to promote and develop an organised and robust pension system in the country that would serve the old age income needs of the people. 

• PFRDA has the mandate to develop, promote and regulate the pension industry under the umbrella architecture of the National Pension System (NPS).

National Pension System

• NPS was initially notified for central government employees, recruits with effect from January 1, 2004, and subsequently adopted by almost all state governments for its employees.

• Later, NPS was extended to all Indian citizens (resident/non-resident/overseas) on a voluntary basis and to corporates for their employees. 

• It offers two types of accounts, namely Tier-I and Tier-II. 

• The Tier-I account is the Pension account, while the Tier-II account is a voluntary withdrawable account which is allowed only when there is an active Tier-I account in the name of the subscriber.

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