NPS Vatsalya: You Can Amass Rs 5 Cr By Saving Just Rs 1K Monthly

The NPS Vatsalya scheme, recently announced by the government, allows parents to open accounts and contribute under the National Pension System (NPS) on behalf of their minor children till they reach the age of 18 or become major when they can take complete control of their accounts and continue contributing or exit.

Given its long investing duration, from a minor to retirement at 60, NPS Vatsalya offers an incredible opportunity to grow wealth over the long term as they can ride the compounding rocket in the market to become lakhpatis and corepatis.

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The scheme was first announced by the Union Finance Minister, Nirmala Sitharaman, during her 2024-25 budget speech in parliament after the Lok Sabha victory that brought the Modi government back to power for the third term.What’s interesting about the scheme is that investors can tap the compounding growth for the maximum possible period, allowing them to multiply wealth quickly.

How To Become A Corepati Via NPS Vatsalya

Here’s an example.

Suppose a parent deposits Rs 20,000 in an NPS Vatsalya account yearly right from the day of the child’s birth, and the contributions continue till the age of 60. In that case, the accumulated corpus will be Rs. 5,49,37,946.87, assuming the expected annual market return of 10 per cent. However, if they exit the scheme upon reaching 18, the corpus will be Rs 10,03,181.81 with the same annual returns.

Here is the calculation from birth to 18 years of age.

Total corpus after transitioning from NPS Vatsalya to Normal NPS

Source: Manas Chugh CA at Osgan Consultant

During its launch this month, Sitharaman urged parents to subscribe and promote the scheme by gifting it to their children’s friends during birthdays and other social events and create awareness on the importance of savings for old age.

Key Features of NPS Vatsalya

All Indian citizens, including non-resident Indians (NRIs) and Overseas Citizens of India (OCIs), can open the accountat the Points of Presence (POPs) like banks and post offices, with an annual contribution of as little as Rs 1,000.

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The scheme allows for three withdrawals before it becomes a regular NPS account, with an additional three partial withdrawals thereafter. The child can continue contributing after reaching 18.If the corpus exceeds Rs 2.5 lakh, only 20 per cent of it can be withdrawn. The balance must be invested in an annuity. If the corpus is less than Rs 2.5 lakh, it can be withdrawn in a lump sum.To be eligible for partial withdrawals, the account must be at least years old. Like NPS, NPS Vatsalya will be regulated by the Pension Regulatory and Development Authority (PFRDA).