By Shruti Sneha, Pune
Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman, launched NPS Vatsalya scheme, announced in the Union Budget 2024-25, today. The events covered at around 75 locations all over India. Other locations participated through video conferencing, while PRAN membership was distributed to new minor subscribers.
Launch event It was an event for children in schools, focusing attention to securing the future of the finances of the young generation.
At the event, Sitharaman termed the NPS as “a very attractive proposition for the private sector” as their assets have grown at a compound annual growth rate of 43% against just 27% for the government.
According to her, NPS is an accessible, low-cost, tax-efficient, flexible, and portable retirement scheme. NPS has a CAGR of 37% over the last decade, with 18.6 million subscribers and assets under management over ₹13 lakh crore.
The NPS was launched in 2004 for central and state government employees only. It is opened to the private sector only last year, that is, in 2020.
Sitharaman launched NPS Vatsalya, a pension scheme, for children below the age of 18 with a minimum annual contribution of ₹1,000. It can be swapped for a regular NPS account after the beneficiary attains 18 years of age. Pension benefits shall be received based on the accumulated corpus upon reaching 60 years of age.
She said this scheme allows saving for pensionary benefits well in advance, perhaps 15-20 years before entering employment. She further said the NPS scheme had delivered competitive returns since its inception.
About the non-government sector, Sitharaman said impressive returns on investments have been delivered during Covid-19: permitted asset classes thus far have delivered returns of 14% CAGR for equity, 9.1% for corporate debt, and 8.8% for government securities since 2020.
She also referred to the recently introduced Unified Pension Scheme or UPS for central government employees, which will come into effect from April 1, 2025. The scheme has taken the best elements of OPS and NPS together and offers a guaranteed pension that will be 50% of the average basic pay drawn in the last 12 months prior to retirement.
The UPS scheme also gives scope for inflation indexation, which is computed on the basis of the All India Consumer Price Index for industrial workers. UPS, an option for which is available to the states, is a scheme wherein, as against the rigid demand made by every section of its employees for higher benefits and remunerations, the very factor of balancing interest between the employees and the taxpayers prevents from burdening the future generations with heavy pension bills.