NPS Swasthya update: PFRDA mandates health insurance, allows full exit for treatment

The Pension Fund Regulatory and Development Authority (PFRDA) has made health insurance benefits mandatory under the NPS Swasthya Pension Scheme’s Proof of Concept (PoC 2), as part of revised guidelines issued on April 7, 2026.

Launched in January 2026, NPS Swasthya is a voluntary, contributory pension scheme designed to help Indian citizens manage outpatient and inpatient medical expenses within the Multiple Scheme Framework (MSF). Under the updated norms, subscribers must avail health insurance benefits, which will be governed by the respective insurer’s terms and conditions along with applicable IRDAI regulations. The regulator has also mandated full transparency in disclosures, including coverage, exclusions, claims process, and grievance redressal mechanisms. Premiums for insurance top-ups will be deducted through partial withdrawals from the subscriber’s NPS Swasthya account.

Contribution to withdrawal

The circular sets a minimum initial contribution of ₹25,000 for onboarding, after which subscribers become eligible for scheme benefits. In cases where hospitalisation expenses exceed the permissible partial withdrawal limit, subscribers can opt for premature exit, allowing 100% lump sum withdrawal regardless of corpus size.

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The withdrawn amount will be directly transferred to the Health Benefit Administrator (HBA), third-party administrator (TPA), or health-tech platform handling the claim. Any surplus after settlement will be credited back to the subscriber’s common scheme account.

The scheme is open to all Indian citizens, with contributions allowed as per non-government NPS guidelines and invested under MSF norms. Subscribers above 40 years (excluding government sector participants) can transfer up to 30% of contributions from their common account to the NPS Swasthya account.

Additionally, subscribers can withdraw up to 25% of their own contributions for medical needs without a waiting period, provided a minimum corpus of ₹50,000 is maintained. Claims will be settled directly with the relevant administrator based on valid documentation.

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Top highlights of NPS Swasthya

1. Multi-institutional structure for execution

NPS Swasthya is a collaborative framework led by PFRDA as the regulator, with Medi Assist Healthcare Services acting as the core technology partner. CAMS KRA handles onboarding and KYC, while Tata Pension Fund and Axis Pension Fund manage investments. Health coverage is provided by Aditya Birla Health Insurance, with Medi Assist TPA overseeing claims—creating an integrated pension-health ecosystem.

2.  Integrated insurance top-up cover

The scheme includes a health insurance top-up from Aditya Birla Health Insurance, adding a layer of financial protection beyond the pension-linked withdrawals.

3. Healthcare + retirement planning

The scheme directly addresses rising healthcare costs in India, projected to grow 11.5%–14% in 2026, which could strain long-term retirement savings. It integrates health financing into pension planning, a gap largely unaddressed in traditional retirement products.

4. Early access to retirement savings

Unlike regular NPS, where funds are locked until retirement, NPS Swasthya allows withdrawal of up to 25% of contributions for medical expenses through a “Net Eligible Balance.” This provides liquidity for both outpatient (OPD) and inpatient (IPD) treatments.

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5. Flexible withdrawal structure

Subscribers can make multiple partial withdrawals with no waiting period, provided a minimum corpus of ₹50,000 is maintained. This ensures immediate access to funds during medical emergencies without procedural delays.

6. Fully digital access via MAven App

Withdrawals and healthcare access are enabled through the MAven App, developed by Medi Assist, which is integrated with the CAMS Central Recordkeeping Agency (CRA). This ensures seamless, real-time access to funds and claims processing.

7. Cashless care

Subscribers benefit from Medi Assist’s network of 15,500+ hospitals across 1,264 cities, enabling cashless treatment for hospitalisation and streamlined outpatient services through a tech-enabled platform.

8. Scale and ecosystem relevance

The launch comes as India’s pension ecosystem expands rapidly, with NPS and APY covering 9.64 crore subscribers and ₹16.55 lakh crore AUM (as of March 2026) — making NPS Swasthya a timely innovation within a growing financial framework.