PFRDA Pilots ‘NPS Swasthya Pension Scheme’: New Sandbox Initiative to Allow Use of Retirement Corpus for Health Expenses
New Delhi, 30th January 2026: In a move to integrate healthcare security with retirement planning, the Pension Fund Regulatory and Development Authority (PFRDA) has announced the launch of the “NPS Swasthya Pension Scheme.”
Issued via a circular dated January 27, 2026, the initiative is being introduced as a ‘Proof of Concept’ (PoC) under the regulator’s Regulatory Sandbox Framework. The new scheme aims to provide NPS subscribers with a dedicated mechanism to cover immediate medical expenses, including Out-Patient Department (OPD) treatments and hospitalization, using a portion of their pension corpus.
Industry Veteran Calls it a “Timely Step”
The initiative is reportedly the brainchild of Dr. Tapan Singhel, MD and CEO of Bajaj General Insurance, who serves as a member of the PFRDA Advisory Committee and Chairman of the CII National Committee on Insurance and Pensions.
Dr. Singhel, who has long advocated for the convergence of health and pension planning, welcomed the move as a reflection of a “progressive regulator.”
“Over the last few years… I have been consistently advocating that retirement planning in India must reflect healthcare realities,” Dr. Singhel said. “The NPS Swasthya Pension Scheme… is a timely step that reflects a government that listens and a progressive regulator willing to innovate responsibly, with the right safeguards before scale.”
He further commended the speed of execution led by PFRDA officials Mr. S Ramann and Mr. Randip Singh Jagpal in translating the intent into action.
Key Features of the Scheme
According to the circular and its annexure, the scheme operates on a voluntary basis for Indian citizens. Key highlights include:
Fund Transfer for 40+ Age Group: Subscribers aged above 40 (excluding the government sector) can transfer up to 30% of their existing contributions from their primary NPS account (Common Scheme Account) to the new “NPS Swasthya Pension Scheme Account.”
Withdrawal Limits: Subscribers can make partial withdrawals up to 25% of their contributions in the health account to meet medical expenses. A minimum corpus of ₹50,000 is required to avail of this facility.
Critical Care Exit: In cases of severe illness where inpatient costs exceed 70% of the health account’s total corpus, subscribers are permitted a “premature exit” to withdraw the entire 100% lump sum to pay for treatment.
Direct Settlement: To ensure transparency, claims will be settled directly to the Health Benefit Administrator (HBA) or Third Party Administrator (TPA) based on valid invoices, rather than cash in hand to the subscriber.
Regulatory Context
The scheme is currently in a pilot phase (Regulatory Sandbox). This allows Pension Funds (PFs) to collaborate with FinTechs and health administrators to test the operational feasibility of the product in a controlled environment before a potential full-scale rollout. If the pilot is not deemed viable after the test period, subscribers will be allowed to transfer their funds back to their primary NPS account.
