NPS Vatsalya Calculator: How can a Rs.10,000 NPS Vatsalya Investment Make Your Child Crorepati?

The NPS Vatsalya is the latest addition to the range of pension schemes launched by the NDA government under Prime Minister Narendra Modi’s leadership. This new initiative marks a major step in expanding social security for all citizens, enabling individuals to harness the power of compounding to steadily grow a substantial retirement fund over time. Combined with the NPS Vatsalya Calculator, which simplifies retirement planning, this scheme offers greater flexibility, tax benefits, and long-term financial security.

In this blog, we’ll explore the calculator’s key features and how it can help you make smarter decisions about your retirement savings.

Importance of NPS Vatsalya Scheme?

NPS Vatsalya Scheme is similar to the National Pension System (NPS), which is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and is specifically designed for minors. Parents can begin investing in this scheme for their children from infancy, with the option to discontinue once the child turns 18. The primary goal is to build a long-term investment portfolio for the child’s future.

Under the NPS Vatsalya Scheme, parents can contribute a minimum of Rs 1,000 annually, with no upper limit on contributions. When the child turns 18, the account automatically converts into a regular NPS account. As with traditional NPS accounts, guardians can choose from various pension fund managers and opt for either an active or auto investment choice. The maximum equity allocation, a high-risk asset class with potential for significant returns, is capped at 75%.

Notably, upon maturity, at least 80% of the total accumulated amount must be used to purchase an annuity plan, while the remaining 20% can be withdrawn as a lump sum.

What is the NPS Vatsalya Calculator?

The NPS Vatsalya Calculator is a dedicated online tool that helps NPS subscribers estimate their potential retirement savings and the pension they may receive. By entering simple information such as your current age, investment amount, expected returns, and retirement age, the calculator offers a clear overview of your future financial security.

Key Inputs Required for the Calculator:

• Current Age: Determines how many years you will be contributing to the NPS.
• Investment Amount: The monthly or yearly contribution you make.
• Expected Rate of Return: The projected annual returns from your NPS investments.
• Retirement Age: The age at which you intend to start withdrawing from your NPS account.
• Annuity Selection: After retirement, part of your savings will be converted into an annuity to provide a regular pension.

Calculator of NPS Vatsalya Scheme

If a parent invests Rs 10,000 per year in NPS Vatsalya Scheme for their child, which is less than Rs 1,000 per month, the child could potentially receive Rs 11.05 crore by the time they turn 60.

According to a post by the Press Information Bureau (PIB) Chandigarh on the social media platform X (formerly Twitter), an annual contribution of Rs 10,000 can yield the following results:

• Annual Contribution: Rs 10,000
• Investment Duration: 18 years
• Estimated Corpus at Age 18: Rs 5 lakh (with a 10% rate of return)
• Estimated Corpus at Age 60:
  • 10% Return: Rs 2.75 crore
  • 11.59% Return: Rs 5.97 crore
  • 12.86% Return: Rs 11.05 crore

📈 Investment Choices with #NPSVATSALYA

• Active Choice: Tailor your investment mix
• Auto Choice LC-75 (Aggressive): High risk, high return
• Auto Choice LC-50 (Moderate): Balanced approach
• Auto Choice LC-25 (Conservative): Low risk, stable returns

Choose your choice! pic.twitter.com/HzkFJSSis3

— PIB in Chandigarh (@PIBChandigarh) September 18, 2024

Structure of the NPS Vatsalya Scheme

 NPS Vatsalya Scheme is expected to offer similar returns as the National Pension System (NPS), which has delivered strong returns since its launch. For private sector NPS, which started in 2009, the returns have been impressive.

In the government sector, NPS has achieved a 9.5% compound annual Growth Rate (CAGR). In the voluntary non-government sector, including the all-citizens and corporate models, equity funds have seen a 14% CAGR since inception. Corporate debt and government securities have also performed well, with returns of 9.1% and 8.8%, respectively. These figures highlight the solid performance of NPS funds across various sectors.

The NPS Vatsalya investment options include:

• Active Choice: Customize your investment allocation
• Auto Choice LC-75 (Aggressive): High risk, high returns
• Auto Choice LC-50 (Moderate): Balanced risk and return
• Auto Choice LC-25 (Conservative): Low risk, stable returns

NPS Vatsalya Scheme Withdrawal Procedure

1. Withdrawal Eligibility:

• Requests can be made before the child turns 18 years old if certain conditions are met.
• After three years of enrollment, you can withdraw up to 25% of the total contributions.
• This withdrawal option is available three times until the child reaches adulthood.

2. Permitted Uses:

• Withdrawals can be used for:
  • Education expenses
  • Specific medical treatments
  • Cases of disability over 75%

3. Transition to NPS Account:

• At age 18, the NPS Vatsalya account automatically converts to a regular NPS account.
• Subscribers must complete new Know Your Customer (KYC) procedures within three months of the transition.

4. Exit Options:

• If exiting the NPS system:
  • At least 80% of the total corpus must be reinvested in an annuity plan.
  • The remaining 20% can be withdrawn as a lump sum.
  • If the total corpus is less than Rs 2.5 lakh, the full amount can be withdrawn without restrictions.

How does the NPS Vatsalya Calculator help?

1. Simple Estimation of Retirement Savings: One of the key benefits of the NPS Vatsalya Calculator is its ability to help you estimate how much money you will have by retirement. This insight allows you to plan your contributions wisely and determine if you’re saving enough to sustain your lifestyle after retirement.

2. Pension Projections: The calculator provides an estimate of the monthly pension you can expect to receive. This information helps you evaluate whether the pension will meet your anticipated post-retirement expenses, allowing you to adjust your investments as needed.

3. Informed Decision Making: This tool allows you to experiment with different factors, such as increasing your contributions or changing your retirement age. It aids in making smarter choices to enhance your retirement savings.

4. Comparison of Scenarios: You can conveniently compare various investment scenarios by modifying rates of return or annuity options. This flexibility is crucial for refining your retirement strategy.

Final Thoughts

Planning for retirement can feel overwhelming, but tools like the NPS Vatsalya Calculator make it much easier. Its user-friendly interface and precise projections enable you to approach retirement planning with confidence and intelligence. Whether you’re already an NPS subscriber or exploring it as an option for your children, this calculator is a valuable asset for ensuring a financially secure future for your child.