What Is PFRDA’s NPS Swasthya Scheme and How Does It Cover Hospital Bills?

India’s pension regulator has introduced an innovative pilot scheme. On January 27, 2026, the Pension Fund Regulatory and Development Authority launched the NPS Swasthya Pension Scheme under its Regulatory Sandbox Framework. The scheme allows subscribers to use part of their pension savings for medical expenses, a first-of-its-kind experiment within the National Pension System. At a time when healthcare costs are rising sharply, this initiative could reshape how Indians plan for both health and retirement.

What Is the NPS Swasthya Pension Scheme

• The NPS Swasthya Pension Scheme is a health-linked contributory pension product introduced within the National Pension System framework.
• It is designed specifically to meet outpatient and inpatient medical expenses while preserving the long-term nature of pension savings.
• The scheme operates as a sector-specific scheme under the Multiple Scheme Framework (MSF) and is offered voluntarily to Indian citizens.
• Subscribers are required to maintain a Common Scheme Account along with a separate Swasthya Pension Scheme account.

Role of PFRDA and Regulatory Sandbox

• The scheme has been introduced by the Pension Fund Regulatory and Development Authority as a proof of concept under its Regulatory Sandbox Framework.
• A regulatory sandbox allows controlled testing of new financial products with limited subscribers and strict oversight.
• Through this pilot, PFRDA aims to assess whether health-related benefits can be safely and efficiently integrated into pension products, while ensuring transparency, consumer protection, and regulatory compliance.

How the Scheme Is Structured

• The Swasthya Pension Scheme is a contributory scheme, meaning benefits depend on individual contributions.
• It is governed by provisions of the PFRDA Act, particularly Sections 12 and 20.
• Contributions are invested according to existing MSF guidelines, and all charges, including payments to Health Benefit Administrators (HBAs), must be disclosed clearly. T
• he scheme may involve collaboration with fintech firms, HBAs, and Third-Party Administrators (TPAs), reflecting a technology-driven approach to pension innovation.

Access to Funds for Medical Expenses

• One of the most important features of the pilot is flexible fund access. Subscribers can make partial withdrawals up to 25% of their own contributions to meet medical expenses.
• There is no restriction on the number of withdrawals and no mandatory waiting period, provided a minimum corpus of ₹50,000 has been accumulated.
• In cases of critical inpatient treatment, where expenses exceed 70% of the available corpus, subscribers are allowed a premature exit with 100% lump-sum withdrawal, strictly for medical purposes.

Who Can Join and How Benefits Are Availed

• Any Indian citizen can enrol in the NPS Swasthya Pension Scheme, provided they have or open a Common Scheme Account.
• Subscribers above 40 years of age, excluding government employees and staff of government-owned corporates, can transfer up to 30% of their self or employer contributions into the Swasthya scheme.
• The scheme will initially be offered to a limited number of subscribers.
• If the pilot is found unviable, participants can transfer their corpus back to the Common Scheme Account and exit under existing NPS rules.

Question

Q. The NPS Swasthya Pension Scheme has been launched by:

A) RBI
B) SEBI
C) PFRDA
D) Ministry of Health