NPS Swasthya Pension Scheme: PFRDA launches scheme on pilot basis under regulatory sandbox

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new health-linked pension product, the NPS Swasthya Pension Scheme, as a proof of concept under its Regulatory Sandbox Framework. The initiative aims to test the feasibility of integrating health-related benefits with the existing National Pension System (NPS) while ensuring subscriber protection and regulatory oversight.

According to the circular issued on January 27, 2026, the scheme will operate on a limited and controlled basis for a specified period. It will be launched by pension funds with prior approval from the regulator and may involve collaboration with fintech firms, health benefit administrators (HBAs) and third-party administrators (TPAs). The move is part of PFRDA’s broader effort to encourage innovation within the NPS framework in a transparent and subscriber-centric manner.

The structure

The NPS Swasthya Pension Scheme has been structured as a contributory pension product focused on meeting outpatient and inpatient medical expenses. It will function as a sector-specific scheme under the Multiple Scheme Framework (MSF) and will be offered voluntarily to Indian citizens. Subscribers must maintain a Common Scheme Account alongside the Swasthya Pension Scheme account.

“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.”

How to access funds

A key feature of the pilot is the flexibility it offers in accessing funds for healthcare needs. Subscribers will be allowed to make partial withdrawals to cover medical expenses, subject to a limit of 25 per cent of their own contributions. There will be no restriction on the number of withdrawals or a minimum waiting period, provided a minimum corpus of ₹50,000 has been accumulated. In cases of critical inpatient treatment where expenses exceed 70 per cent of the available corpus, subscribers will be permitted a premature exit with a 100 per cent lump-sum withdrawal solely for meeting medical costs.

How to avail benefits

Subscribers above 40 years of age, excluding those in the government sector and government-owned corporates, may transfer up to 30 per cent of their self or employee contributions from the Common Scheme Account into the Swasthya Pension Scheme. Contributions will be invested as per existing MSF guidelines, and all fees and charges will be disclosed transparently.

Initially, the scheme will be rolled out with a limited number of subscribers. If the pilot does not establish viability, participants will be allowed to transfer their accumulated corpus back to the Common Scheme Account and exit under existing NPS rules. The pilot is expected to provide crucial insights into combining healthcare financing with retirement savings within India’s pension system.

Other details:

> Eligibility: Any Indian citizen can enrol in the NPS Swasthya Pension Scheme, with a Common Scheme Account mandatory if not already in place.

> Charges: Fees and charges under the scheme will be governed by the MSF and disclosed transparently, including payments to the Health Benefit Administrator (HBA).

> Partial withdrawals: Subscribers can make partial withdrawals for outpatient or inpatient medical expenses, up to 25% of their own contributions, with no cap on the number of withdrawals, after a minimum corpus of ₹50,000 is accumulated.

> Premature exit: In cases of critical inpatient treatment where expenses exceed 70% of the available corpus, subscribers may exit prematurely with a 100% lump-sum withdrawal solely to meet medical costs.

> Claim settlement: Withdrawn or exited amounts will be paid directly to the HBA or TPA against valid claims, with any surplus credited back to the subscriber’s Common Scheme Account.