NPS Health: Withdraw Up to 25% for Treatment, Insurance Cover Until Age 85

The National Pension System (NPS) will introduce a dedicated health‑linked scheme, NPS Health, in October. Unlike the regular NPS account, this product pairs a pension fund with a compulsory health‑insurance top‑up, allowing members to pull out up to a quarter of their contributions for approved medical costs while retaining insurance cover that can be renewed until the age of 85.

Structure of the Scheme

The plan separates the investment account from the health‑insurance component. The insurance element functions as a super top‑up, meaning it sits on top of any existing cover and is mandatory for all participants. Both parts are legally distinct, so a member can keep an existing NPS account and open a new NPS Health account without closing the former.

Eligibility and Account Opening

Any Indian citizen aged 18 to 70 can enrol. When opening the account, three payments are required: the first year’s insurance premium, a modest maintenance fee of ₹200, and a minimum contribution of ₹1,000 to the investment account. After activation, members may add contributions as low as ₹10.

Partial Withdrawal for Medical Expenses

The standout feature is the ability to withdraw up to 25 % of the balance in the health account for outpatient visits or hospitalisation costs. There is no limit on the number of withdrawals. If a claim exceeds the 25 % limit, the scheme permits the use of the entire accumulated balance under specified circumstances, ensuring that treatment does not stall due to insufficient funds.

Cashless Settlement at Hospitals

Payments to hospitals are intended to be cashless. Once the hospital provides the necessary details, approval for cashless treatment is expected within an hour, and discharge authorisation within three hours. The insurance top‑up amount is transferred directly to the hospital, reducing the need for the patient to manage multiple claim processes.

Choice of Insurance Provider

Pension fund managers will partner with various insurance companies to create joint products. This gives members the flexibility to select a fund manager and an insurance partner that best suit their risk appetite and coverage needs.

Insurance Cover and Waiting Periods

Coverage can reach up to ₹30 lakh, subject to the chosen plan’s terms. Standard waiting periods apply: a 30‑day waiting period for non‑accidental illnesses and a 12‑month waiting period for pre‑existing conditions. Accident‑related claims are exempt from these waiting periods.

Renewal and Premium Non‑Payment

Renewal notices are sent 90, 60 and 30 days before the due date if the investment account lacks sufficient funds. Failure to pay the premium results in policy termination, after which the NPS Health account automatically converts into a regular NPS account, preserving the invested capital.

Transfer from Existing NPS Accounts

Members of the all‑citizen NPS model can transfer a portion of their existing balance to the new health account to meet the initial deductible of the chosen insurance plan. Typical transfer amounts might be ₹10,000, ₹50,000, ₹1 lakh or ₹3 lakh, depending on the policy’s requirements.

Longevity of the Insurance Cover

While entry into the scheme is limited to ages 18‑70, the insurance component can be renewed up to the age of 85 without a fresh medical underwriting at each renewal, provided the policy remains in force.

Investment Returns on Unused Funds

Any amount that remains unused for medical claims stays invested in the NPS Health account, earning returns in line with market performance. This dual benefit ensures that members retain a safety net for health emergencies while also growing their retirement savings.