Three Pension Funds Considering Bundled Health Cover Options for Investors, Says PFRDA Chief

The Pension Fund Regulatory and Development Authority (PFRDA) is exploring new pension plans that include health covers. Chairman S Ramann stated that three pension funds are working on these plans, which may involve partnerships with health insurers or healthcare providers. This initiative aims to encourage investors to save for medical expenses through a dedicated medical pension scheme.

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Ramann highlighted the Swasthya platform, launched in January, which allows up to 30% of an investor's funds to be allocated for medical expenses during a pension plan. The aggregation of investors under the National Pension System (NPS) enables better negotiation for health cover deals. This could lead to more affordable top-ups from health insurers beyond the 30% allocation.

Health Cover Integration and Investor Benefits

Hospitals might offer better treatment deals due to high volumes, and they will receive payments immediately after treating patients. This contrasts with central government health schemes, where payment delays are common. ICICI, Axis, and Tata-sponsored pension funds are currently experimenting with this coverage model, with ICICI expected to launch a final product soon.

Efforts are also being made to maintain double-digit returns over extended periods by investing in asset classes like project finance and real estate. The first pension fund investment into an alternative investment fund is anticipated by March's end. Up to 5% of investments will be directed towards alternative avenues, including gold and silver exchange-traded funds, which will not exceed 1%.

Expanding Pension Fund Participation

At least four banks or bank consortiums have shown interest in entering the pension fund business following PFRDA's approval. This includes Axis Bank and a consortium of Union Bank of India, Indian Bank, and Star Daichi. Despite NPS coverage being low at just 1 crore people, efforts are underway to increase participation.

PFRDA is collaborating with the National Payments Corporation of India (NPCI) to enhance investor acquisition. The NPCI-run unified payments interface is used by over 800 million people who have completed KYC with a bank. This collaboration aims to facilitate digital onboarding through third-party application providers.

The PFRDA's initiatives reflect a strategic approach to integrating health covers into pension plans while expanding investment opportunities. These efforts aim to provide better financial security for investors and improve overall participation in the NPS.

With inputs from PTI