The National Pension System or NPS depends on the force of long-term compounding to create a sizeable corpus for the use of a person in his/her advanced years and a pension. NPS Vatsalya which was announced by Union Finance Minister Nirmala Sitharaman in the budget for FY25 and rolled out a few days ago aims an extending the scheme virtually close to one’s birth.
Most important, a person can accumulate an amount more than Rs 10 crore, or Rs 100 million, according to calculations announced officially. The finance minister has herself stated that the scheme could be used to teach youngsters the value of regular investment over the long term.
The calculation
The X account of PIB Chandigarh has put out a projection to illustrate what NPS Vatsalya can create for a young person if his/her parents open such an account and begins investing.
The parents can actually begin modestly by putting an annual investment of Rs 10,000. If the parents continue the contribution till the age of 18 of the kid, the expected corpus is Rs 5 lakh, assuming a 10% rate of return.
Then comes the real fun. If, after becoming adult, the person takes over the baton from his/her parents and continue the investment, the amount that would be accumulated at 10% return will be Rs 2.75 crore when he/she turns 60 years.
Corpus of Rs 11 crore+ at 60
This amount will take a quantum jump and reach Rs 5.97 crore if the return rises to 11.59%. The amount will sail past the Rs 100 million, or Rs 10 crore, if the return clocks 12.86%, which is not an impossibility given such a long tenure of investment. In fact, the amount will touch Rs 11.05 crore at the age of 60. The accountholder will get both a lumpsum and a pension from this corpus.
Minimum contribution
The scheme is flexible and it is not necessary that parents invest a sizeable sum every year. One can begin with only Rs 1,000 a year in NPS Vatsalya. There is no upper limit on the amount that can be contributed.
All one needs to open an NPS minor account is a PAN and Aadhaar card in the name of the minor.
The scheme has been designed keeping in mind the need to inculcate the culture of saving and investment from a very early age. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
