The Pension Fund Regulatory and Development Authority (PFRDA) has introduced important changes to the NPS Vatsalya scheme, which is a pension plan for children under 18.
Now, pension funds can invest up to 100% in equities, giving them greater potential for long-term growth.
Pension funds will also receive selective information about children’s accounts to help manage investments more effectively. These changes aim to make the scheme more integrated and allow children’s money to grow better over time.
Under the new rules, pension funds will have limited and controlled access to subscriber information and greater flexibility in investment decisions.
The circular announcing these changes was issued on February 23, 2026, and shared with all pension funds and stakeholders associated with NPS.
Flexible Investment Strategies
According to Paragraph 12 of the NPS Vatsalya Yojana Guidelines, 2025, different pension funds can now vary their investment strategies while staying within prescribed limits.
This means each fund may follow a different strategy, and performance may differ. Pension funds can either:
Follow the general asset allocation prescribed by PFRDA (with no minimum requirement in any asset category), or
Develop their own strategy to optimize returns.
Benefits of Sharing Data
NPS Vatsalya accounts are managed by parents for children. Under the new circular, central recordkeeping agencies will share certain information with pension funds, including:
Parent details
Child’s gender
Deposit method
State or region
Male-female ratio
Method of contribution
This data helps pension funds make informed investment decisions and better manage the scheme.
Higher Risk, Higher Rewards
For younger children with a long investment horizon of 15-20 years, investing more in equities can lead to better compounding over time.
Market fluctuations may occur, but experts say that even a small difference of 1-2% in annual returns can make a significant difference over decades.
This approach is ideal for those with long-term goals and higher risk appetite, such as plans spanning 50-60 years.
Purpose of the New Rules
PFRDA has clarified that these changes aim to:
Enable pension funds to create data-driven strategies
Promote the scheme and increase enrollment
Strengthen the NPS legacy over the long term
Enhance transparency, protect subscribers, and allow timely corrective action
Any pension fund or intermediary violating these rules will face regulatory action.
