Why in news?
The Pension Fund Regulatory and Development Authority (PFRDA) introduced the NPS Swasthya Pension Scheme as a pilot project under its Regulatory Sandbox Framework. Announced on 27 January 2026, the health‑linked pension product allows National Pension System subscribers to finance outpatient and inpatient medical expenses through a dedicated account. It is being tested with a limited number of participants to evaluate feasibility before a wider rollout.
Background
Established under the PFRDA Act 2013, the National Pension System offers voluntary retirement savings to Indian citizens. Traditionally NPS funds are earmarked for retirement; however, rising healthcare costs have prompted regulators to explore linking pension savings with medical benefits. The Swasthya scheme seeks to test this integration while upholding subscriber protection and data privacy. It functions within the Multiple Scheme Framework of NPS and follows a contributory model.
Key features
- Eligibility: Any Indian citizen can join the scheme, provided they hold a Common Scheme Account under NPS.
- Voluntary participation: Subscription is optional. Pension Funds will offer the scheme after obtaining PFRDA approval.
- Contributions: Subscribers may contribute any amount in line with existing NPS guidelines. Those above 40 years (excluding government sector subscribers) may transfer up to 30% of their contributions from the main account to the Swasthya account.
- Withdrawal for medical expenses: Partial withdrawals up to 25% of one’s contributions can be made for outpatient or inpatient treatment, subject to a minimum corpus of ₹50,000. There is no limit on the number of withdrawals. For critical inpatient care where costs exceed 70% of the available corpus, subscribers may opt for 100% premature withdrawal solely for medical purposes.
- Claim settlement: Withdrawn amounts are paid directly to the Health Benefit Administrator, third‑party administrator or hospital based on valid claims. Surplus funds after settling bills are credited back to the subscriber’s main NPS account.
- Data protection and grievance redressal: Pension Funds must obtain explicit digital consent for data sharing and put in place robust grievance mechanisms. They may collaborate with FinTech firms and health service administrators.
- Exit option: If the pilot does not prove viable, subscribers can transfer the accumulated corpus back to the Common Scheme Account and exit under existing NPS withdrawal rules.
Significance
- The scheme aims to make healthcare more affordable for NPS subscribers without replacing traditional health insurance. It could encourage long‑term savings by integrating health and retirement planning.
- Pilot testing allows regulators to identify operational challenges, including technology integration, fund management and data privacy, before broader implementation.
- If successful, the model may inspire similar health‑linked pension products, improving social security coverage in India.
Source: BS
