New Delhi: The Pension Fund Regulatory and Development Authority (PFRDA) has launched the second proof-of-concept phase of NPS Swasthya, an initiative designed to integrate retirement savings under the National Pension System (NPS) with healthcare funding support.

The pilot aims to provide subscribers with the ability to access a portion of their pension corpus during medical emergencies, addressing the rising burden of healthcare expenses while maintaining long-term retirement planning discipline.

NPS Swasthya: Linking pension savings with healthcare needs

Under the proposed framework, NPS Swasthya enables subscribers to withdraw up to 25% of their eligible pension contributions, referred to as the “Net Eligible Balance”, specifically for medical expenses. This marks a shift in how pension funds may be utilised, allowing retirement savings to function as a financial safety net during health emergencies.

The system is designed for digital access, enabling faster and more streamlined fund withdrawal through an app-based mechanism.

How the system will work

Subscribers will be able to request medical withdrawals via the MAven app, which is expected to be integrated with NPS account data for quicker processing and verification.

The initiative brings together multiple ecosystem partners to support implementation and operations, including:

  • Medi Assist, providing the core technology infrastructure and claims processing support
  • CAMS KRA, handling onboarding and KYC verification
  • Pension fund managers such as Tata Pension Fund and Axis Pension Fund
  • Aditya Birla Health Insurance, offering integrated top-up health insurance coverage
  • Medi Assist TPA, managing claims administration

PFRDA remains the regulatory authority overseeing the framework.

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Rising healthcare costs are driving reform

The initiative comes amid concerns over rapidly increasing medical inflation in India. Healthcare costs are projected to rise between 11.5% and 14% in 2026, significantly outpacing general inflation. This trend is placing greater strain on household savings and retirement funds.

Officials and industry observers note that retirees often end up withdrawing from pension savings to manage medical emergencies, weakening long-term financial security. NPS Swasthya is intended to bridge this gap by formally integrating healthcare access within the pension ecosystem.

India’s growing pension ecosystem

According to PFRDA data, the combined National Pension System and Atal Pension Yojana framework has:

  • A subscriber base of 9.64 crore individuals
  • Total assets under management of approximately ₹16.55 lakh crore as of 29 March 2026

The scale of the system has strengthened the case for more flexible withdrawal mechanisms that balance liquidity needs with retirement security.

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Key implications for NPS subscribers

The introduction of NPS Swasthya represents a structural change in pension fund usage, effectively positioning NPS as both a retirement corpus and an emergency healthcare buffer.

However, the scheme includes important limitations. Only up to 25% of contributions can be accessed for medical needs, meaning premature withdrawals could reduce the final retirement corpus. Financial discipline will therefore remain essential for long-term beneficiaries.

The pilot will help determine how effectively integrated healthcare-linked pension access can function within India’s broader retirement savings framework.