In a major move to link healthcare security with retirement planning, the Pension Fund Regulatory and Development Authority (PFRDA) has introduced the NPS Swasthya Pension Scheme (NSPS). The scheme was announced through a circular dated January 27, 2026, and is currently being launched as a Proof of Concept (PoC) under PFRDA’s Regulatory Sandbox Framework.
The initiative allows National Pension System (NPS) subscribers to use a portion of their retirement savings to meet Out-Patient (OPD) and hospitalisation expenses, addressing the rising healthcare costs in India.
The NPS Swasthya Pension Scheme is a voluntary, health-linked pension product introduced within the NPS framework. It allows subscribers to create a dedicated medical fund while continuing retirement savings.
Provide financial support for medical expenses
Allow controlled access to pension funds during emergencies
Integrate healthcare planning with retirement savings
The scheme operates under the Multiple Scheme Framework (MSF) of NPS.
The scheme is open to:
Any Indian citizen
Existing or new NPS subscribers
Subscribers must maintain:
A Common Scheme Account (Regular NPS Account)
A Separate NPS Swasthya Pension Scheme Account
Contributions are completely voluntary.
Subscribers can invest any amount as per NPS guidelines for the Non-Government Sector.
Investments will follow MSF investment norms.
All charges, including payments to Health Benefit Administrators (HBAs), must be disclosed transparently.
Subscribers aged above 40 years (excluding Government Sector employees and government-owned corporations) can:
Transfer up to 30% of their own or employer contributions
Transfer from their Common Scheme Account to Swasthya Account
Subscribers can withdraw money to cover:
OPD treatment
Hospitalisation costs
Up to 25% of subscriber’s own contributions can be withdrawn
No restriction on the number of withdrawals
No waiting period required
Minimum corpus of ₹50,000 must be maintained
Withdrawals are permitted strictly for medical purposes under the PFRDA Act, 2013.
In cases of serious illness:
If hospitalisation costs exceed 70% of total Swasthya account corpus
Subscriber can exit the scheme
Allowed 100% lump-sum withdrawal
No minimum corpus requirement
Withdrawal allowed only for medical treatment expenses
To ensure funds are used properly:
Payments are made directly to:
Health Benefit Administrator (HBA), or
Third-Party Administrator (TPA)
Based on verified medical bills and invoices
Any remaining surplus amount is transferred back to the subscriber’s Common Scheme Account
The scheme is currently being tested under PFRDA’s Regulatory Sandbox Framework, which allows new financial products to be tested in a controlled environment.
Pension Funds must obtain PFRDA approval before offering the scheme
Pension Funds may collaborate with:
FinTech companies
HBAs
TPAs
Certain provisions under the PFRDA Exit and Withdrawal Regulations, 2015 have been relaxed for this pilot
If the scheme is found unviable, the subscriber’s corpus will be safely transferred back to the Common Scheme Account.
Healthcare expenses are one of the biggest financial risks during retirement. Many retirees are forced to withdraw long-term savings to meet medical needs.
The NPS Swasthya Scheme aims to:
Provide structured access to medical funds
Create a dedicated healthcare corpus
Reduce dependence on emergency borrowing
Strengthen long-term retirement planning
Suppose a subscriber has ₹5 lakh in their Swasthya account:
They can withdraw up to ₹1.25 lakh (25%) for regular medical expenses
If hospitalisation costs reach ₹3.5 lakh (70%), they can withdraw the entire corpus for treatment
This flexibility ensures medical emergencies do not derail retirement savings completely.
| Feature | NPS Swasthya Scheme | Health Insurance |
|---|---|---|
| Source of Funds | Own pension savings | Insurance coverage |
| Premium Requirement | No fixed premium | Mandatory premium |
| Coverage Limit | Based on accumulated corpus | Policy coverage limit |
| Withdrawal Flexibility | Partial or full withdrawal | Claim-based |
| Long-Term Savings | Yes | No |
While the scheme provides healthcare support, subscribers should note:
Frequent withdrawals may reduce retirement corpus
It should be used strategically for major medical expenses
Financial planning advice is recommended before large withdrawals.
Industry Expert View
Dr. Tapan Singhel, MD & CEO of Bajaj Allianz General Insurance and member of the PFRDA Advisory Committee, described the initiative as a “timely and progressive step that aligns retirement planning with healthcare realities.”
Since the scheme is currently a pilot project:
Subscribers’ funds remain safe
Entire corpus will be transferred back to the Common Scheme Account
Exit will follow standard NPS rules
Frequently Asked Questions (FAQs)
No, participation is voluntary.
Government sector subscribers are not eligible for contribution transfer benefits.
No, withdrawals can be made anytime after meeting corpus requirements.
No, withdrawals are allowed strictly for medical expenses.
No, it is designed to complement health insurance, not replace it.
The success of the pilot will determine whether the scheme is permanently integrated into NPS. Interested subscribers should monitor announcements from their Pension Fund Managers regarding implementation.
Objective Question
Q. The NPS Swasthya Pension Scheme has been launched by:
A) RBI
B) SEBI
C) PFRDA ✅
D) Ministry of Health
The NPS Swasthya Pension Scheme represents a significant innovation in India’s pension ecosystem. By allowing subscribers to use retirement savings for healthcare needs, the scheme offers financial flexibility during medical emergencies while maintaining long-term retirement planning. If successfully implemented, it could redefine how Indians manage healthcare and retirement simultaneously.