If you are saving for retirement through the National Pension System (NPS), you may soon get the option to combine pension savings and health security. The Pension Fund Regulator and Development Authority (PFRDA) has said that three pension fund managers are working on schemes to link pension products with health cover by partnering with insurance companies or health service providers.
The idea is part of the regulator’s “Health” initiative launched earlier this year, which aims to help investors set aside a portion of their retirement savings specifically for health expenses. Under this concept, up to 30 per cent of pension savings can be reserved for health care needs during retirement, creating a dedicated “medial pension” fund. Its goal is to prepare people financially for rising health care costs as they age, which is often one of the biggest risks in retirement.
Product can be launched soon
A large number of investors participate in NPS, so pension funds can negotiate better prices for health insurance top-ups and medical services. This could mean cheaper insurance add-ons, faster claim settlement by hospitals and potentially lower treatment costs for customers. Pension funds backed by ICICI, Axis and Tata Group are currently experimenting with such offerings and a product may be launched soon.
PFRDA President S Raman said that our aim is to make people understand that they have to take care of their safety. We want them to save money in the medical pension scheme. And this scheme will make payments only for medical purposes. It is noteworthy that PFRDA had launched the health platform in January this year for this very purpose. According to this scheme, up to 30 per cent of the investor’s money can be set aside to cover medical expenses during the tenure of the pension plan.
What kind of product can it be?
Raman said integration of investors is one of the biggest benefits of NPS, which allows pension funds to make better deals and provide some health insurance cover for investors. He said that this may also include the affordable top-up amount given by health insurance companies, which will be in addition to the prescribed amount of 30 percent. He also said that due to the large number of patients coming, hospitals will also be able to give better offers for treatment. Health facilities will receive payment immediately after treating a patient, unlike central government health schemes that take months to release payments.
These four banks are working
Raman named pension funds sponsored by ICICI, Axis and Tata, which are currently “experimenting” with introducing such coverage. He said he is hopeful that ICICI will soon bring out the final product for customers. The PFRDA chief also said that efforts are on to study ways to sustain double-digit returns over a longer period of time, and added that investments will also be made in asset categories like project finance and real estate. He expressed hope that the pension fund’s first investment in an alternative investment fund will be made before the end of March, and said this is part of the mandate to invest up to 5 per cent in alternative investment options.
Group of these banks came forward
He said that investment in exchange-traded funds of gold and silver will also be a part of this and it will not be more than 1 percent. He said at least four banks or group of banks have shown interest in getting into the pension fund business after the PFRDA permitted such a move, including Axis Bank and Union Bank of India, Indian Bank and a group of Star Daiichi. Admitting that NPS coverage is extremely low, limited to only 1 crore people, Raman said PFRDA is in talks with the National Payments Corporation of India to help attract investors.