PFRDA Introduces ‘NPS Swasthya Pension Scheme’ on Pilot Basis Under Regulatory Sandbox
The Pension Fund Regulatory and Development Authority (PFRDA) has approved the introduction of a new health-linked pension product titled ‘NPS Swasthya Pension Scheme’, to be implemented as a Proof of Concept (PoC) under its Regulatory Sandbox Framework.
The move is aimed at testing the feasibility of integrating medical expense support within the existing National Pension System (NPS) architecture, while examining operational, technological and regulatory implications.
Health expenses linked with pension savings
Under the proposed scheme, subscribers will be able to use a dedicated NPS account to meet out-patient and in-patient medical expenses. The scheme will function as a sector-specific contributory pension scheme within the Multiple Scheme Framework (MSF) of NPS and will be offered to Indian citizens on a voluntary basis.
PFRDA has clarified that the scheme will be governed by the provisions of the PFRDA Act, 2013, and will initially operate only for a limited duration in a controlled environment.
Limited pilot with regulatory relaxations
The NPS Swasthya Pension Scheme will be launched by Pension Funds after obtaining prior approval from PFRDA. As it is being implemented as a pilot project, only a restricted number of subscribers will be enrolled during the PoC phase.
To facilitate the pilot, certain provisions of the PFRDA (Exits and Withdrawals under NPS) Regulations, 2015 have been relaxed. Pension Funds may also collaborate with FinTech firms and health service administrators to implement the scheme.
Key features of the scheme
As per the guidelines issued by PFRDA:
- Any Indian citizen is eligible to join the scheme, but a Common Scheme Account under NPS is mandatory.
- Subscribers can contribute any amount, in line with existing NPS guidelines applicable to the non-government sector.
- Subscribers aged above 40 years (excluding government sector subscribers) may transfer up to 30% of their contributions from the Common Scheme Account to the Swasthya Pension Scheme.
- Partial withdrawals are permitted for medical expenses up to 25% of the subscriber’s own contributions, with no limit on the number of withdrawals, subject to a minimum accumulated corpus of ₹50,000.
- In cases of critical inpatient treatment, where medical expenses exceed 70% of the available corpus, subscribers may opt for 100% premature withdrawal solely to meet such medical costs.
Claim settlement and safeguards
Amounts withdrawn under the scheme will be paid directly to the Health Benefit Administrator (HBA), Third Party Administrator (TPA), or hospital, based on valid claims and supporting bills. Any surplus remaining after settlement of medical expenses will be transferred back to the subscriber’s Common Scheme Account.
Pension Funds are required to establish a robust grievance redressal mechanism in coordination with service providers. The scheme also mandates compliance with the Digital Personal Data Protection Act, 2023, including obtaining explicit digital consent from subscribers for data sharing at the time of activation.
What happens after the pilot period
If the Proof of Concept does not establish the viability of the scheme, subscribers enrolled during the pilot phase will be given an option to transfer their accumulated corpus back to the Common Scheme Account and exit in accordance with existing NPS withdrawal rules.
The initiative signals a potential shift towards integrating healthcare financing with retirement planning under the NPS framework, depending on the outcome of the pilot phase.
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