Pension savings with health insurance? NPS may introduce new option

Up to 30% of NPS savings may be earmarked for medical expenses. ICICI, Axis, Tata pension funds working on health-linked plans

If you are saving for retirement through the National Pension System (NPS), you may soon get an option that combines pension savings with health-care protection. The Pension Fund Regulatory and Development Authority (PFRDA) on Friday said that three pension fund managers are working on plans that bundle pension products with health covers, either through tie-ups with insurance companies or healthcare providers.

 

The idea is part of the regulator’s “Swasthya” initiative, launched earlier this year, which aims to help investors set aside part of their retirement savings specifically for medical expenses. Under this concept, up to 30% of pension savings could be earmarked for healthcare needs during retirement, creating a dedicated “medical pension” pool. The goal is to encourage people to prepare financially for rising healthcare costs in old age, which is often one of the biggest retirement risks.

 

Because NPS aggregates a large number of investors, pension funds may be able to negotiate better prices for health insurance top-ups and medical services. This could mean cheaper insurance add-ons, faster claim settlement for hospitals, and potentially lower treatment costs for subscribers. Pension funds backed by ICICI, Axis, and Tata groups are currently experimenting with such offerings, and a product launch could happen soon.

 

Pension Fund Regulatory And Development Authority (PFRDA) Chairman S Ramann said "Our aim is to try and get people to understand that they have to protect themselves. We want them to save money in a medical pension scheme. And it is dedicated for payment to medical purposes only. It can be noted that the PFRDA had launched the Swasthya platform in January this year with this intent. As per the scheme, up to 30 per cent of an investor's money can be set aside for covering medical expenses during the period of a pension plan."

 

Ramann said aggregation of investors is among the biggest of the advantages that NPS offers, which allows pensions funds to negotiate better deals while making some health covers available for investors.

 

This may also include cheaper top-ups from health insurance companies, which will be over and above the 30 per cent amount that is set aside, he said, adding that hospitals will also be able to give better deals for treatments because of the high volumes.

 

Healthcare facilities will also get their money immediately after treating a patient, which is unlike a central government health scheme which take months to release payments.

 

Ramann named pension funds sponsored by ICICI, Axis, and Tatas as ones conducting "experiments" on launching such a coverage right now, and added that he expects ICICI to come up with a final product for customers soon.

 

The PFRDA chief also said efforts are underway to study how double-digit returns can be sustained over longer periods of time, and added that investments in asset classes like project finance and real estate will also be undertaken.

 

He expects the maiden pension fund investment into an alternative investment fund to happen before the end of March, and added that this is part of the mandate to invest up to 5 per cent in alternative avenues.

 

Investments in gold and silver exchange-traded funds will be part of that and not exceed over 1 per cent levels, he said.

 

At least four banks, or consortium of banks, have evinced interest to get into pension fund business after the PFRDA allowed such a move, he said, adding that this includes Axis Bank and a consortium of Union Bank of India, Indian Bank, and Star Daichi.

 

Admitting that the NPS coverage is dismally low at just 1 crore people, Ramann said the PFRDA is in talks with the National Payments Corporation of India for help in investor acquisition.  wITH INPUTS FROM pti