NPS Vatsalya Calculation: How Rs 5,000/m investment can take your retirement corpus to Rs 19.19 crore
NPS Vatsalya Retirement Planning: A parent or a guardian can open a minor's NPS Vatsalya account. The account will be opened in the name of the minor, but it will be operated by the parent/guardian. While the Permanent Retirement Account Number (PRAN) will be in the minor's name, they will also be the sole beneficiary of the scheme.
NPS Vatsalya Calculation: Retirement planning should be started early. But if we leave aside the schemes where monthly contributions are mandated by the government, not many youngsters start retirement planning early. But starting investing late has its own disadvantages. It leaves the investor with fewer years of compounding compared to early starters. As a result, the investment amount for a late starter is most likely much higher compared to the one who starts early. If two people start with the same, small investment amount 5 years apart, the retirement corpus of the early starter is most likely to be much higher than the late starter in the long run. Going by the same logic, the NPS Vatsalya scheme, which allows minors' entry to National Pension System (NPS) can be a game-changer for someone starting to contribute early. Even if their corpus grows by 10 per cent annually, they can generate corpus compared to a person who starts NPS contribution at the age of 18 years or higher. In this write-up, know more about NPS Vatsalya and through calculations, also know how a minor contributor under NPS Vatsalya can have a significant edge over someone starting NPS contribution at 18.
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What is NPS Vatsalya?
The scheme allowed minors' entry to NPS. Earlier, the minimum age to open an NPS account was 18 years, but now minors 0–18 years old can open an account under the NPS Vatsalya scheme.
Who can open NPS Vatsalya account?
A parent or a guardian can open a minor's NPS Vatsalya account. The account will be opened in the name of the minor, but it will be operated by the parent/guardian. While the Permanent Retirement Account Number (PRAN) will be in the minor's name, they will also be the sole beneficiary of the scheme.
What are minimum and maximum contributions in NPS Vatsalya?
The minimum contribution is Rs 1,000 per annum, while there is no maximum limit.
What are investment choices in NPS Vatsalya?
The default choice in NPS Vatsalya is Moderate Life Cycle Fund, where equity will be 50 per cent.
The other two choices are Auto Choice and Active Choice.
What are investment choices in NPS Vatsalya?
In Auto Choice, a guardian can opt for Lifecycle Fund - Aggressive -LC-75 (75 per cent equity), Moderate LC-50 (50 per cent equity) or Conservative-LC-25 (25 per cent equity).
What are investment choices in NPS Vatsalya?
In Active Choice, a guardian can actively decide the allocation of funds across equity (up to 75 per cent), corporate debt (up to 100 per cent, government securities (up to 100 per cent), and alternate asset (5 per cent).
What are NPS Vatsalya withdrawal conditions?
Partial withdrawal up to 25 per cent of corpus is allowed after a 3-year lock-in period for education, specified illness, and disability. The account holder can have a maximum three such withdrawals till 18 years of age.
What are NPS Vatsalya withdrawal conditions?
At 18 years of age, the account holder can withdraw up to 20 per cent, and the 80 per cent amount should be used to purchase annuity. But if the corpus is less than Rs 2.50 lakh, the entire corpus can be withdrawn.
What will happen if minor or guardian dies?
If the minor dies, the corpus will be returned to the guardian. If the guardian dies, another guardian is needed to be registered. If both parents die, the legally appointed guardian can continue the account.
When will happen to NPS Vatsalya account when minor turns 18?
The account will be shifted to the NPS Tier I account, and a new KYC for the minor will be done.
What will be corpus on Rs 5,000/m contribution till age 18?
We are assuming 10 per cent annualised growth for 18 years. If one invests Rs 5,000 monthly, their investment in 18 years will be Rs 10,80,000, and their estimated corpus will be Rs 28,81,990.
What will be corpus on Rs 5,000/m contribution till age 60?
One will invest Rs 36,00,000 in 60 years at the rate of Rs 5,000 a month. Their estimated corpus in that period will be Rs 19,18,08,539.
What if someone starts NPS contribution at 25?
At Rs 5,000/month, in 35 years, their contribution will be Rs 21,00,000, and the estimated corpus will be Rs 1,71,29,467.
What if someone starts NPS contribution at 35?
At Rs 5,000 per month, their contribution will be Rs 15,00,000 in 25 years, and their estimated corpus will be Rs 62,15,798.