PFRDA's Swasthya Pension Scheme explained: where it helps, risks involved
New Delhi, Jan 29, 2026
Designed as a healthcare buffer under NPS, not a substitute for full health cover, says experts
The Pension Fund Regulatory and Development Authority (PFRDA) has rolled out the NPS Swasthya Pension Scheme (NSPS) on a pilot basis, aiming to link retirement savings with healthcare spending. While the idea appears attractive, experts caution that the scheme works only for a narrow set of subscribers and cannot replace health insurance.
Who the scheme suits and who should stay away?
From a personal finance lens, NSPS is best suited for existing National Pension System (NPS) subscribers aged over 40 who already have a sizeable corpus, according to Tanvi Kanchan, associate director at Anand Rathi Share and Stock Brokers Limited. The key advantage lies in the ability to transfer up to 30 per cent of one’s NPS Common Account balance into a dedicated healthcare pool without committing fresh money.
The scheme may also help people with chronic conditions such as diabetes or hypertension, where annual outpatient costs can range between Rs 15,000 and Rs 30,000. “NSPS allows unlimited OPD withdrawals without waiting periods, unlike health insurance where pre-existing diseases can remain excluded for years,” Kanchan says.
However, she warns that NSPS makes little sense for individuals who already hold comprehensive health insurance of Rs 5lakh –Rs 10 lakh. The opportunity cost of locking money into a low-return, self-funded medical corpus is high. Those aged 65 and above should also be cautious, as the Rs 50,000 minimum corpus requirement delays access for several years.
Vishwajeet Goel, head of Pensionbazaar.com, adds that the scheme may appeal to older individuals or late entrants to insurance who struggle to obtain fresh cover due to age or medical history. Still, he stresses that NSPS is only a supplementary buffer, not primary protection.
How does it work in a medical emergency?
The difference between NSPS and health insurance becomes stark during a major hospitalisation. For a Rs 6 lakh–Rs 8 lakh cardiac procedure, health insurance typically offers cashless treatment with direct settlement, sharply reducing stress and out-of-pocket costs, Goel explains.
NSPS, by contrast, requires the subscriber to pay the hospital bill upfront and seek reimbursement later, subject to withdrawal limits and processing timelines. Kanchan points out that the reimbursement delays of 7–15 days can create serious liquidity strain, especially when hospitals demand immediate payment.
What risks do subscribers must understand?
Experts highlight several risks:
· Only 25 per cent of contributions (not total corpus) can be withdrawn at a time
· Large medical events can exhaust the entire corpus in one instance
· Market-linked returns may not keep pace with medical inflation
· Once the catastrophic exit rule is triggered, future medical needs remain uncovered
“ NSPS shifts healthcare risk back to the individual,” Kanchan says, underlining that unlike insurance, it does not pool risk across subscribers.
NSPS can complement insurance for select NPS subscribers, particularly for OPD expenses. But experts agree it should never be viewed as a substitute for comprehensive health cover.
[The Business Standard]
