Summary of this article
PFRDA has issued guidelines for NPS Vatsalya scheme
New guidelines clarify investment and withdrawal rules
The Pension Fund Regulatory and Development Authority (PFRDA) has issued new guidelines for NPS Vatsalya scheme. Through this, the PFRDA has updated the regulatory and operational framework of the scheme meant for minors under the National Pension System (NPS).
NPS Vatsalya Scheme Guidelines 2025, notified on January 7, replaces the earlier guidelines. The updated guidelines will come into effect after the PFRDA completes system-level preparations.
Classification As Specific Purpose Scheme
Under the new guidelines, a primary change in the NPS Vatsalya scheme is its formal classification as a ‘Specific Purpose Scheme’. This follows the amendments made in December, which allows PFRDA to issue scheme-specific rules for navigating exits, withdrawals, and operations under the scheme.
The changes in guidelines also provide for a detailed regulation on partial withdrawals for minors. Partial withdrawals are only permitted three years after the account is opened for certain specific purposes. These include education, treatment of specified illness, disability exceeding 75 per cent. Withdrawals from the scheme are also capped at 25 per cent of total contributions made, which excludes returns. This also limits the number of withdrawals allowed before and after the investor turns 18 years of age.
Transition Process After 18 Years Of Age
The new guidelines clarify what happens when the investor turns 18 years of age. In such a case, the account can continue under the NPS Vatsalya for up to the next three years. However, a fresh KYC and nomination details must be provided once the subscriber turns 18.
Subscribers also have the choice to shift the account to the NPS All Citizen Model. They can also withdraw a lump sum up to 80 per cent with annuitisation of balance, or fully withdraw the amount if the total corpus is below Rs. 8 lakh.
If the subscriber does not exercise the choice by the time they turn 21 years of age, the account automatically shifts to a high-risk equity oriented pension fund under the Multiple Schemes Framework.
Changes In Investment Framework
Investment guidelines are now more formally defined, with the framework now specifying asset allocation limits for investments under the NPS Vatsalya scheme. It now allows higher equity exposure compared to man other traditional pension schemes.
The changes now allow 50-75 per cent of investment in equity, 15-20 per cent investment in government securities, 10-30 per cent in debt instruments. This aligns with the updated NOS Master Circular released last March.
Another addition in the updated guidelines is the targeted incentive framework to boost enrolment under the scheme, specifically in rural and semi-urban localities. Anganwadi workers, ASHA workers, Bank Sakhis and other government-recognised community workers are eligible for incentives of up to Rs. 100 for each NPS Vatsalya account they enrol. PFRDA said that the incentive structure will be reviews after a year.
The updated guidelines also explain that the charges and fees applicable under the NPS Vatsalya scheme will be the same as the NPS All Citizen Model. It also aligns with the charges PoPs, CRAs, pension funds, NPS trust and custodians.
