With healthcare costs rising steadily, retirement planning is increasingly overlapping with medical preparedness. A new pension product now attempts to combine both objectives within the National Pension System (NPS) framework.
ICICI Prudential Pension Funds Management Company Limited has launched ICICI PF NPS Swasthya Equity Plus, a first-of-its-kind pension scheme under the NPS.
Introduced as a Proof of Concept (PoC) under the Pension Fund Regulatory and Development Authority Regulatory Sandbox framework, the scheme aims to bridge long-term retirement savings with immediate healthcare liquidity.
How it works
The NPS Swasthya Equity Plus scheme follows a high-growth investment mandate to counter medical inflation.
Subscribers can withdraw up to 25% of their own contributions for medical expenses, including OPD, diagnostics and pharmacy purchases. However, the first withdrawal is permitted only after the account accumulates at least ₹50,000. There is no cap on the number of partial withdrawals during the scheme’s tenure.
If emergency medical expenses exceed 70% of the total accumulated corpus, a 100% withdrawal or premature closure is permitted.
The scheme allocates 70-100% of the corpus to equities, up to 30% to debt, and up to 10% to money market instruments.
If regularized, existing NPS account holders may be allowed to transfer up to 30% of their contributions into the Swasthya scheme.
Planner concerns
The structure has drawn initial scrutiny from financial planners.
Mrin Agarwal, founder of Finsafe India Pvt Ltd, flagged concerns about the ₹50,000 threshold. “I feel that when one has a medical emergency, then one needs funds to be easily available, and I think this is a small downside in the product. Otherwise, I think it's good that there is a health savings product that is being introduced in India.”
"NPS Swasthya Pension Scheme is a contributory pension scheme. Also note that only up to 25% of own contributions can be withdrawn for healthcare expenses, the remaining corpus is earmarked towards retirement. One should be mindful that it is not a substitute for a standalone medi-claim or health insurance cover,” added Amol Joshi the founder of PlanRupee Investment Services.
Determine your specific health insurance coverage needs based on your age, health and other factors and be adequately insured, he advised.
Medical inflation hedge
The scheme targets a key vulnerability in Indian household finances—high out-of-pocket medical expenses. Industry data suggest that around 40% of individuals pay healthcare costs out of pocket, and nearly one-fourth of hospitalizations are funded by selling assets.
Sivasubramanian Ramann, chairperson of PFRDA, said:
“We have identified the fact that you have to start at a young age to secure an old age. The power of this Swasthya account really comes from the fact that I have a certain pool of money, which is determinant, which is growing, and which I can put for us as my part of the contribution in the event of a hospitalization”.
“With increasing longevity and rising healthcare costs, retirement planning needs to account for medical contingencies," said Sumit Mohindra, chief executive officer, ICICI Prudential Pension Funds Management Company. This scheme is designed for Indians who seek to build a structured retirement corpus, while retaining the flexibility to utilize accumulated savings in the NPS scheme for medical-related expenses, he added.
He emphasised that Swasthya complements insurance rather than replaces it:
“Swasthya will come into play only when somebody either doesn't have enough or adequate coverage, but certain things are not covered. Nothing can replace medical insurance”.
Apollo integration
The scheme is integrated with the Apollo HealthCo network to ensure delivery of services and financial benefits. Subscribers receive healthcare benefits and discounts across the Apollo network.
Pharmacy orders get an additional 2% discount, up to a maximum total discount of 18%. Diagnostic orders receive an additional 15% discount. The scheme provides three free virtual consultations every month.
In-patient services include a 10% discount on room rent and investigations, with a 5% discount on OT and professional fees. Out-patient benefits include 15% off investigations and 10% off consultations. Health check packages are discounted by 20%.
KFintech serves as the Central Recordkeeping Agency, handling validation and rule-based processing. Withdrawals are OTP-authenticated, and funds are disbursed directly to the Apollo network rather than in cash to subscribers.
As a sandbox experiment, PFRDA will monitor uptake and claims processing before deciding on full-scale regularization.