NPS Vatsalya scheme lets grandparents and friends fund a child’s pension

Expanded gifting options under NPS Vatsalya The Pension Fund Regulatory and Development Authority (PFRDA) updated the NPS Vatsalya Scheme Guidelines in 2025, with the changes taking effect on 23 February 2026. The revision clarifies that anyone – not just parents or legal guardians – may make monetary gifts to a minor’s NPS Vatsalya account. Grandparents, other relatives and even family friends can contribute, but they do not acquire any control over the account.

Who can operate the account? The child is the subscriber and sole beneficiary of the account. A parent or legal guardian remains the account operator until the child reaches 18 years of age. A grandparent can only become the operator if they are also the child’s legal guardian; otherwise, they may contribute funds as a gift without gaining operational rights. The same rule applies to other relatives and friends.

Contribution mechanics * **Minimum contribution** – Rs 250 when the account is opened and at least Rs 250 each year thereafter. * **No ceiling** – There is no maximum limit on the amount or the number of contributions in a financial year. * **Payment channels** – Contributions can be made through registered Points of Presence, the eNPS platform, UPI apps and other electronic modes approved by PFRDA.

For example, a grandparent could give Rs 10,000 on a birthday and later add Rs 5,000, while an aunt could also contribute, all of which become part of the child’s pension corpus.

Ownership and returns All money deposited belongs to the minor. The funds are pooled into a PFRDA‑registered pension fund and earn market‑linked returns, meaning the corpus can fluctuate with market performance. It is not a fixed‑rate bank deposit.

Withdrawal rules Partial withdrawals are permitted after the account has completed three years, up to 25 % of the subscriber’s own contributions (excluding returns). Withdrawals are allowed for specific purposes such as education, medical treatment or certain disabilities.

Transition at adulthood When the subscriber turns 18, a fresh KYC process is required. The account may continue under the Vatsalya scheme until the child is 21, be transferred to a regular NPS Tier I account, or be closed with withdrawal according to the applicable exit rules.

Practical impact for families The new guidelines make it easier for extended family members and close friends to support a child’s long‑term financial security without complicating account administration. By allowing multiple contributors, the potential corpus for a minor’s retirement savings can grow substantially.

What to watch next * **Uptake data** – Monitoring how quickly families adopt the broader contribution base. * **Regulatory tweaks** – Any further amendments to contribution limits or withdrawal conditions. * **Investment performance** – How market‑linked returns affect the accumulated corpus for minor subscribers. * **Awareness campaigns** – Efforts by PFRDA or financial institutions to educate the public about the expanded gifting options.