New Delhi: In a move that could reshape how Indians plan for both retirement and medical needs, the Pension Fund Regulatory and Development Authority (PFRDA) has introduced the ‘NPS Swasthya Pension Scheme’ as a pilot project under its Regulatory Sandbox Framework. It has been launched as a Proof of Concept (PoC) and the initiative seeks to blend health-related financial benefits with the existing National Pension System (NPS). This offers subscribers a more holistic approach to long-term financial security.
Launched for a limited and controlled period, the NPS Swasthya Pension Scheme is aimed at helping subscribers manage both out-patient and in-patient medical expenses. The scheme will function under the Multiple Scheme Framework (MSF) and will be contributory in nature, meaning individuals will need to make regular contributions. Participation is completely voluntary and open to Indian citizens who wish to add a health-focused layer to their retirement planning.
In a circular issued on January 27, the PFRDA clarified that the NPS Swasthya Pension Scheme will be rolled out as a separate sector scheme under the National Pension System. The regulator also explained that the scheme is focused solely on providing financial assistance for out-patient and in-patient medical expenses and will function within the Multiple Scheme Framework (MSF).
“The NPS Swasthya Pension Scheme shall be introduced as a specific sector scheme under the NPS, intended exclusively to provide financial support for out-patient and in-patient medical expenses, within the framework of the Multiple Scheme Framework (‘MSF’). The Scheme shall be a contributory pension scheme, governed by the provisions of section 12(1)(a) and section 20 of the PFRDA Act and shall be offered to citizens of India on a voluntary basis.”
Under the NPS Swasthya Pension Scheme, subscribers can contribute any amount of their choice, which will be invested by Pension Funds (PFs) as per the Multiple Scheme Framework (MSF) guidelines. Those aged above 40 years are also allowed to transfer up to 30% of their contributions from their existing NPS Common Scheme Account to this health-focused scheme.
The scheme permits partial withdrawals for medical needs, allowing subscribers to withdraw up to 25 per cent of their own contributions. However, the first withdrawal can only be made once the minimum corpus reaches Rs 50,000.
In situations where a single medical expense exceeds 70 per cent of the total corpus, subscribers will have the option of premature exit with 100 per cent lump-sum withdrawal. The withdrawn amount will be paid directly to the Health Benefit Administrator (HBA), Third Party Administrator (TPA), or the hospital. If any amount remains after settling the medical bill, it will be transferred back to the subscriber’s Common Scheme Account.
To safeguard subscribers’ interests, the PFRDA has directed Pension Funds (PFs), in coordination with Health Benefit Administrators (HBAs) and Third Party Administrators (TPAs), to set up a strong grievance redressal system. This is aimed at ensuring that any complaints or issues raised by subscribers are addressed quickly and efficiently.
The regulator has also made it clear that sharing of subscriber-level data for claim purposes must strictly follow the provisions of the Digital Personal Data Protection Act, 2023. Explicit digital consent from subscribers will be required at the time of activating the scheme.
As this is currently a Proof of Concept (PoC), the initiative will allow PFRDA to evaluate how feasible it is—operationally, technically, and from a regulatory standpoint—to integrate health benefits with pension savings under the NPS framework. The findings could help determine whether the scheme is expanded into a full-scale offering in the future.
The NPS Swasthya Pension Scheme is open to all Indian citizens who wish to enrol. However, subscribers must have a Common NPS Scheme Account. If an individual does not already have one, it will be mandatorily opened along with the NPS Swasthya Pension Scheme account at the time of registration.
The fees and charges under the NPS Swasthya Pension Scheme will be governed by the rules of the Multiple Scheme Framework (MSF). The PFRDA has stated that all applicable costs will be disclosed clearly to ensure transparency for subscribers. These charges will also include the fees payable to the Health Benefit Administrator (HBA), along with other applicable expenses under the scheme.
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