Arthgyaan

Supporting everyone's personal finance journey

Will NPS Vatsalya Give Your Child Eleven Crores When They Retire?

This article discusses the corpus projections shared officially when launching the NPS Vatsalya scheme and how parents should be aware of the danger of ignoring inflation.

Will NPS Vatsalya Give Your Child Eleven Crores When They Retire?


Posted on 20 Sep 2024
Author: Sayan Sircar
6 mins read
📢Join 3300+ readers on WhatsApp and get new post notifications!

This article discusses the corpus projections shared officially when launching the NPS Vatsalya scheme and how parents should be aware of the danger of ignoring inflation.

Will NPS Vatsalya Give Your Child Eleven Crores When They Retire?

This article is a part of our detailed article series on avoidable investment plans for your children. Ensure you have read the other parts here:

📚 Topics covered:

Will NPS Vatsalya Give Your Child 11 Crores When They Retire?

We saw this tweet when analysing the NPS Vatsalya launch on 18 September 2024. The source is the official Twitter account of the Press Information Bureau (Chandigarh office):

Projection: Will NPS Vatsalya Give Your Child 11 Crores When They Retire

© X / https://x.com/PIBChandigarh/status/1836329030695391394

What does the Tweet (X?) say?

  • If you invest a small amount like ₹10,000/year
  • and continue investing the same amount for 60 years in NPS Vatsalya
  • and get the same 12.86% that has been seen in NPS since inception

Then, your child will get ₹11.05 crores when they reach the age of 60.

Where do the ₹11 Crores come from?

There is nothing wrong with the projection mathematically. After all,

Corpus = FV(return,years,annual_contribution,0,0)

Corpus = FV(0.1286,60,-10000,0,0) = ₹11.03 crores

Using Excel / Google Sheets, you can type in this formula “=FV(0.1286,60,-10000,0,0)” and get the same result.

We will also make the, albeit ludicrous, assumption that the underlying NPS Vatsalya portfolio with equity and debt in a pre-defined proportion behaves like an FD and gives a fixed 12.86% a year.

The bigger problem, for those who have not come across the nuance, is that the ₹11 crores is not after inflation. Let us not ignore that this corpus was created after 60 years.

Did you know that we have a private Facebook group which you can join for free and ask your own questions? Please click the button below to join.

What is the impact of inflation on ₹11 crores after 60 years?

Rule of 72

We use the rule of 72 to estimate the effect of inflation quickly. 7% inflation of goods and services shows that the cost will double in approximately 10 years or the purchasing power of money will be cut by half. So if you have 8 crores today, somehow, then the

  • value of 8cr will be 4cr in 10 years
  • value of 8cr will be 2cr in 20 years
  • value of 8cr will be 1cr in 30 years
  • value of 8cr will be 50 lakhs in 40 years
  • value of 8cr will be 25 lakhs in 50 years
  • value of 8cr will be 12.5 lakhs in 60 years

Effect of inflation over 60 years on NPS Vatsalya corpus

Applying the same logic to the ₹11 crore corpus, we see that after 60 years, the accumulated ₹11 crores will have the same worth as ₹34 lakhs today.

A quick mental maths shortcut to calculate this is:

  • 7.2% inflation = halving in 10 years
  • 60 years = 6 halvings
  • 2 ^ 6 = 64
  • Value of corpus = 1103 / 64 = 17

Also read
Frequently asked questions on Tax Deducted at Source (TDS): the complete guide

What will be the pension from ₹11 crores of corpus after 60 years?

This is where the absurdity of ignoring inflation in making a 60-year projection hits.

Let’s assume that the entire NPS corpus at retirement is invested into a pension plan at the age of 60.

Let’s also assume, that 60 years later, Indian annuities are still offering a 7% return.

What is the pension per year?

₹11 crores at 7% gives ₹77 lakhs/year or ₹6.43 lakhs/month pension

After 60 years of inflation, these numbers were reduced by 64 times

₹17 lakhs at 7% gives ₹1.2 lakhs/year or ₹10,000/month pension

Let’s not forget that this ₹10,000 stays fixed for life and loses 50% value every decade. You need to understand what exactly your child will do with ₹10,000/month where on paper, they are sitting on ₹11 crores of corpus.

What if we invest more or get a higher return?

That is not the point of this article. We can always plug in numbers in Excel and make assumptions to get any number after 60 years.

However, the point of this article is not to discuss the alternatives to NPS but to complete the picture when rosy scenarios like the PIB tweet are shown.

We anyway strongly believe that NPS Vatsalya is a gimmicky product that is best avoided. There are much better options to create a huge, inflation-adjusted corpus for your children: NPS Vatsalya details revealed: is it good for your children’s future or avoidable?.

What's next? You can join the Arthgyaan WhatsApp community

You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

For resident Indians 🇮🇳:


For NRIs 🇺🇸🇬🇧🇪🇺🇦🇺🇦🇪🇸🇬:


Share on WhatsApp:

To understand how this article can help you:

If you have a comment or question about this article

The following button will open a form with the link of this page populated for context:

If you liked this article, please leave us a rating

The following button will take you to Trustpilot:

Discover an article from the archives

Previous and next articles:



Latest articles:



Topics you will like:



Next steps:

1. Email me with any questions.

2. Use our goal-based investing template to prepare a financial plan for yourself.

Don't forget to share this article on WhatsApp or Twitter or post this to Facebook.

Discuss this post with us via Facebook or get regular bite-sized updates on Twitter.

More posts...

Disclaimer: Content on this site is for educational purpose only and is not financial advice. Nothing on this site should be construed as an offer or recommendation to buy/sell any financial product or service. Please consult a registered investment advisor before making any investments.

This post titled Will NPS Vatsalya Give Your Child Eleven Crores When They Retire? first appeared on 20 Sep 2024 at https://arthgyaan.com


We are currently at 481 posts and growing fast. Search this site:
Copyright © 2021-2024 Arthgyaan.com. All rights reserved.