Sukanya Samriddhi Yojana vs NPS Vatsalya for children: Which scheme should parents with limited funds choose?
Compare the Sukanya Samriddhi Yojana (SSY) and NPS Vatsalya schemes, exploring which can best suited for parents with limited investible surplus seeking financial security for their girl child’s future.
Parents planning for their child’s future have two key government-backed options: Sukanya Samriddhi Yojana (SSY) and NPS Vatsalya. SSY is a guaranteed return scheme designed specifically for girls under 10, offering predictable returns. NPS Vatsalya, however, provides market-linked return with equity exposure, potentially generating higher long-term returns. While both schemes cater to different financial goals, understanding their benefits and limitations can help parents choose the right one based on their financial objectives and risk tolerance.
SSY vs NPS Vatsalya for Girl Child
Parents with limited investible surplus now have two government-backed options to plan for their girl child’s future: Sukanya Samriddhi Yojana (SSY) and NPS Vatsalya. Both schemes cater to different financial needs.
NPS Vatsalya Overview
NPS Vatsalya is a market-linked scheme introduced for parents and guardians to contribute towards a minor’s financial future. It transitions into a normal NPS account once the girl child reaches adulthood.
SSY: Fixed Income Investment
Sukanya Samriddhi Yojana (SSY) is a pure guaranteed return scheme with predictable returns. It’s designed specifically for the financial welfare of girl children under the age of ten.
NPS Vatsalya: Equity Exposure for Growth
Unlike SSY, NPS Vatsalya allows equity exposure. Equity investments have historically outperformed fixed income, making it a more suitable option for long-term goals such as education or wealth creation.
Expert Opinion: Long-Term Benefits of Equity
AR Hemant of BankBazaar.com highlights that equity has a better track record for beating inflation and compounding savings, which makes NPS Vatsalya a potentially smarter choice for financing a girl child's future education.
Flexibility of NPS Vatsalya
NPS Vatsalya offers flexibility through equity investments, making it a better wealth-building tool for the girl child’s future. It is not restricted by gender, unlike SSY, which is exclusively for girls.
Restrictions on Withdrawals
While NPS Vatsalya allows partial withdrawals, they are capped at 20% of the total corpus. This may limit access to funds for immediate needs, unlike the more straightforward withdrawal rules of SSY.
Restrictions on Withdrawals
While NPS Vatsalya allows partial withdrawals, they are capped at 20% of the total corpus. This may limit access to funds for immediate needs, unlike the more straightforward withdrawal rules of SSY.
Rapid Implementation of NPS Vatsalya Scheme
- Announcement and Launch: Finance Minister Nirmala Sitharaman highlighted the swift implementation of the scheme, which was announced in the July Budget and launched quickly.
- Government Efficiency: This rapid action reflects the government’s efficient working style and aligns with the Prime Minister’s vision of a developed India.
Promoting Financial Independence for Future Generations
- Intergenerational Faith: Sitharaman emphasized the importance of “intergenerational faith” in a growing India.
- Financial Responsibility: The NPS Vatsalya Scheme aims to instill financial responsibility in the next generation, similar to how today’s senior citizens benefit from their pensions.
Scheme Features and Flexibility
- Current Rules: All existing NPS rules apply to NPS Vatsalya.
- Withdrawal Provision: Parents can withdraw 25% of the corpus if needed.
- Ongoing Discussions: Consideration of additional exit options and suggestions for improved flexibility.
NPS Growth and Benefits
Growth Rate: The NPS has a strong CAGR of 34%.
Scheme Benefits: NPS Vatsalya encourages a savings mindset with an average return of 9.5%. Accessible through banks, post offices, or online.