NPS Vatsalya: Can your child continue this pension scheme after turning 18? Know the investment rules and exit options

Parents who want to start saving for their child's future can explore NPS Vatsalya, a scheme designed for long-term financial planning for minors. Parents can start contributing to NPS Vatsalya as soon as they open an account for their child.

But what happens when the child turns 18? Who gets the accumulated money, and what options are available for managing or withdrawing it? Here’s what you need to know.

NPS Vatsalya is a contributory savings scheme for minors under the National Pension System (NPS). It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

The account is opened in the minor's name, with the child as the sole beneficiary. A parent or legal guardian operates it until the child turns 18, and a Permanent Retirement Account Number (PRAN) is issued in the child's name.

Indian citizens below 18 years, including eligible Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs), can have an NPS Vatsalya account. The scheme is available irrespective of gender. The parent or legal guardian opens and manages the account on behalf of the minor.

The minimum initial contribution is ₹250, followed by a minimum annual contribution of ₹250. There is no maximum contribution limit. Investments are managed by a pension fund registered with PFRDA. Returns are market-linked and are not guaranteed.

The parent or legal guardian manages the account on behalf of the minor until they turn 18. Upon attaining majority, the subscriber (or child) takes charge of the account and is responsible for its management.

The accumulated contributions, investment returns, and benefits belong solely to the subscriber. The account holder has three options after attaining 18 years of age:

• Continue: The account holder can continue the NPS Vatsalya account until they turn 21.
• Shift to NPS: Transfer the entire accumulated corpus to NPS Tier I under the All Citizen Model or another applicable model.
• Exit: Withdraw the accumulated corpus, subject to the applicable exit rules. If the accumulated corpus is below ₹8 lakh, the entire amount can be withdrawn as a lump sum. If it is ₹8 lakh or more, up to 80% can be withdrawn as a lump sum, while at least 20% must be used to purchase an annuity.

When the subscriber/ child turns 18, they must complete fresh KYC and update nominee details to take control of the account.

They can continue investing under NPS Vatsalya until age 21, transfer the entire accumulated corpus to an eligible NPS account, or exit subject to applicable rules.

If no option is exercised by age 21, the account automatically moves to a higher-equity scheme under the same pension fund's Multiple Schemes Framework (MSF).

Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance. <br><br> She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram. <br><br> Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.

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