Source-This post on Vatsalya Scheme has been created based on the article “NEW PENSION SCHEME ‘VATSALYA’ ANNOUNCED FOR MINORS; CONTRIBUTION BY PARENTS AND GUARDIANS” published in “PIB” on 24 July 2024.
Why in the news?
In the recent Union Budget 2024-25, the Finance & Corporate Affairs Minister introduced a new pension scheme named ‘Vatsalya’ for minors.
About Vatsalya Scheme
Description– This scheme, part of the National Pension Scheme (NPS), aims to assist parents and guardians in preparing for their children’s future financial requirements.
Key Features-
A) Parents or guardians can open an account for their minor children and contribute towards their retirement savings, which will accumulate until the child reaches 18 years old.
B) Once the child reaches adulthood, the accumulated amount will be transferred to the standard NPS account.
C) On attaining the age of majority, the plan can be converted seamlessly into a normal NPS account.
D) It operates similarly to the existing NPS, which helps individuals build a retirement corpus by making regular contributions throughout their careers.
E) NPS contributions are invested in market-linked instruments like stocks and bonds. This offers the potential for higher returns than traditional fixed-income choices.
Significance of Vatsalya Scheme
1) It sets the foundation for responsible financial management from an early age.
2) As these accounts transition into regular NPS plans when the child reaches adulthood, they ensure a smooth continuation of saving habits into adulthood.
Read More-Old Pension Scheme(OPS) vs National Pension System(NPS)
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