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Sunday, October 24, 2021

Commutation of Pension and need for revision of Commutation Table and Commutation Value

 


 Comrade ,

                    

Eligible- Rule position:

Basically, all the Central Government Employees are eligible to commute a percentage of his monthly pension amount, a Government servant shall be entitled to commute for a lump sum payment of an amount not exceeding 40% of his pension. If percentage of pension to be commuted results in fraction of a rupee, such fraction of a rupee shall be ignored for the purpose of commutation – Rule 5

No Government servant against whom departmental or judicial proceedings, as referred to in Rule 9 of the Pension Rules, have been instituted before the date of his retirement, or the pensioner against whom such proceedings are instituted after the date of his retirement, shall be eligible to commute a percentage of his provisional pension authorised under Rule 69 of the Pension Rules or the pension, as the case may be, during the pendency of such proceedings  – Rule 4

Commutation of Pension Formula

Total Commutation Amount = Commuted Amount  x  Commutation Factor x  12

Commutation Factor :  In the  CCS (Commutation of Pension) Rules, the Commutation factor value is given for  different ages, this table value is effective from 1.1.2006.

Commutation Factor Table

Two Tables available for Central Government Employees –

·        Table 1 is effective from 1.3.1971 – till 1/1/2006 - This Table is based on a rate of interest of 4.75 per cent per annum

 Commuted Value (CVP) = 0.4(Maximum) x P x CF x 12

where  P   = Pension Ordered            CF = Commutation Factor

 

For example in 1971 table 1 for employees retiring at 60 years they get a factor of 9.81

·        Table 2 is effective from 1.1.2006 as per the 6th Pay Commission

The table is based on a rate of interest on Commutation of Pension is 8.00% per annum. [Basic: LIC(94-96) Ultimate Tables and 8.00% interest]

For example in 2006  table 2 for employees retiring at 60 years they get a factor of 8.194.

Commutation of Pension Illustration as  per table 1

Note :Commuted Amount : Government Employee pension amount is Rs.32000/- at the time of retirement, he  / she commuted 40% of his pension, then the commuted amount is 40 percent of Rs.32000 i.e. 12800 is the commuted amount here.

Commuted Amount = Rs. 12800/-

Commuted Factor = Take Example, Age Next birthday is 61 years, then the commutation value is 9.81 as per the Commutation Table 

Total Commutation Amount = 12800 X 9.81 x 12

Total Commutation Amount = Rs 15,06,816 /-

Commutation of Pension Illustration as  per table 2: 

Commuted Amount = Rs. 12800/-

Commuted Factor = Take Example, Age Next birthday is 61 years, then the commutation value is 8.194 as per the Commutation Table 

Total Commutation Amount = 12800 X 8.194 x 12

Total Commutation Amount = Rs 12,58,598/-

So the pensioners are losing the Commutation Amount due to higher interest rates.  

If any employee / pensioner does not avail the  Commutation of pension in that case he gets  Rs 12800 X 180 months = 23,04,000/ - instead of lump sump amount of Rs 12,58,598/-   

Now the Government and LIC itself has lowered the interest rates from past fifteen years especially in last five years on small savings and LIC pension policy  they should have a new Commutation Table – 3 and Commutation Value with effect from1/1/ 2020. 

The interest 1/1/2006  was  of 8.0% in Public Provident Fund (PPF), 9.2 % in Senior Citizen Saving Scheme (SCSS), 11.3 % in National Saving Certificate (NSC) 

The interest 1/1/2016 was  of 8.1% in Public Provident Fund (PPF), 8.6 % in Senior Citizen Saving Scheme (SCSS), 8.1 % in National Saving Certificate (NSC) . LIC Pradhan Mantri Vaya Vandana Yojana (PMVVY) interest rate was 10%

 The interest as on 1/1/2020 is  of 7.1% in Public Provident Fund (PPF), 7.4% in Senior Citizen Saving Scheme (SCSS), 6.8% in National Saving Certificate (NSC). Even LIC of India has lowered its interest rates to 6.8%.  LIC Pradhan Mantri Vaya Vandana Yojana (PMVVY) interest rate is 7.4 % ,  LIC Jeevan Shanthi scheme provides 6% interest. 

 Hence there is a need to have a new Commutation Table number 3 with effect from 1/1/2020 considering the interest rates of 6.5 % instead of 8%.  

Restoration of Commuted Portion of Pension- Rule position:

The commuted amount of pension shall be restored on completion of 15 years from the date the reduction of pension on account of commutation becomes operative in accordance with rule 6:

Provided that when the commutation amount was paid on more than one occasion on account of upward revision of pension, the respective commuted amount of pension shall be restored on completion of fifteen years from the respective date(s)

Demands:

1)     Since already the Employees / Pensioners are paid less amount as the interest for commutation amount is deducted already at the time of making commutation payment through a commuted factor, there is no point for Restoration of Commuted Portion of Pension after 15 years.

2)      Restoration of Commuted Portion of Pension should ideally be done after 12 years.

3)     A new Commutation Table -3 with effect from 1/1/2020 as the lowering of interest rates has taken place especially last five years from 2016 onwards as Government and LIC itself has lowered the interest rates from past fifteen years, especially in last five years on small savings and LIC pension policies   

4)              The Commutation Table -3 should have interest rates of 6.5 % instead of present 8% and                Commutation Values shall be recalculated.

5)     The  Commutation Table and Commutation Value should be revised every 10 years as last revision has taken place in the year 2006 , now 15 years are over the revision is imminent due to lowering  in interest rates by Central Government and LIC  .  

                                                                           Comradely yours

                                                                          (P.S.Prasad)

                                                                        Working President

 

 

 

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