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PENSION

Pension is a steady income given to a person after retirement from the organization.

Types of Pension Cases


(1) Superannuation
(2) Family Pension
(3) Voluntary Retirement (VR )

Rules
(i) The qualifying service for evaluation of pension is reduced to 20 years w.e.f.
01.09.2008. Earlier it was 33 years.
(ii) Pension is evaluated on the basis of the last 10 months average pay or last pay
drawn whichever is beneficial to retiring employee

Ceiling
(a) For officers / employees retired in between 01.12.2005 to 31.12.2005

(i) Minimum Pension & Minimum Family Pension - Rs 2396 /- per month
(ii) Maximum Pension - Rs 24956 /- per month
(iii) Maximum Family Pension - Rs 14974 /- per month

(b) For officers /employees retired after 01.01.2006

(i) Minimum Pension & Minimum Family Pension - Rs 2972 / - per month
(ii) Maximum Pension - Rs 30946 /- per month
(iii) Maximum Family Pension - Rs 18568 /- per month

Terms related to the PENSION Calculation

(i) PENSION
(ii) DCRG (Death Cum Retirement Gratuity)
(iii) COMMUTATION
(iv) RESTORATION of Pension
(v) FAMILY PENSION

(i) PENSION
The pension amount is calculated based on the Basic Pay at the time of retirement, Age,
Service years, etc. It is calculated as 50% of average emoluments of last 10 months
salary drawn. It is calculated on Basic and Dearness Pay only.

Formula for Calculation of Pension Amount =


SMP
50% of Avg. emoluments (last 10 months) X --------
66
(ii) DCRG
• This is basically known as Gratuity. Gratuity is the amount given to the employee at
the time of retirement.
• It is calculated on Basic, DP and DA.
• This amount is limited to maximum Rs.3,50,000 / - only.
Formula for Calculation of DCRG

Last Salary Drawn X SMP


= -----------------------------------------------
4

OR

Last Salary Drawn X SMP


= ------------------------------------------------ (in case of Death)
2

(iii) COMMUTATION
• At the time of retirement of the employee, a portion of pension can be withdrawn
by the employee.
• A maximum of 40% of pension amount can be withdrawn at the time of
retirement. However, depending on the amount withdrawn proportionate amount
will be deducted from the Pension amount till 15 years and employee will get
reduced Pension till 15 years.

Formula for calculation of Commutation


= Commutation Percent of Full Pension x Age Factor x 12

Formula for calculation of Reduced Pension


= (Full Pension – Commutation Percent of Full Pension)
+ DA on Full Pension

(iv) RESTORATION
The commuted portion of pension shall be restored on expiration of 15 years from the
date of retirement. After this period the employee is entitled for full pension.

(v) FAMILY PENSION


In case of death of retired employee, his/her pension is entitled to his/her family or
the nominees fixed by the employee. The wife is entitled till her remarriage or death
whichever is earlier. In case of Son/Daughter, children are entitled till an age of 25 years or
marriage, whichever is earlier.
HOW TO CALCULATE PENSION

Prerequisite Data

S.No. Item Description


1 Name Shri Ramji Yadu
2 Designation OA Gr-I
3 Last Office EE(City Dn. East),Raipur
4 Date of Birth 03.06.1949
5 Date of Appointment (W/c) ---
6 Date of Appointment (Regular) 07.06.1975
7 Date of Retirement 30.06.2007
8 BASIC (Current drawn) Rs. 12775.00
9 DPA (Current drawn) Rs. 6363.00
10 DA (Current drawn) Rs. 5536.00 (29%)
11 Interruption

Calculation of various values

Average Emoluments

From 01 / 09 / 2006 To 30 / 06 / 2007 (Number of Months = 10)


Basic Pay = 12725.00
Dearness Pay (50%) = 6363.00
Total Emoluments = 190880.00
Average Emoluments = Rs. 19088.00

SMP (Six Monthly Periods) -


The total Qualifying Service is converted into SMP.
Here, in example
Qly Service = Date of Retirement – Date of Appointment (as Reg.)
YYYY MM DD
2007 6 30
- 1975 6 24
32 0 6

Therefore, Qly Service = 32 Years

SMP = 32 x 2 = 64 SMP

Age Factor (mentioned as MF) -


Age on birthday next to the retirement date = 59 Years
Therefore MF corresponding 59yr = 10.46

Total Pay
Last Basic Drawn = 12725.00
Dearness Pay (50% of Basic) = 6363.00
Dearness Allowance (29% of Basic + DP) = 5536.00
Total Pay = 24624.00
Calculation of Pension

(i) Pension
SMP
= [ 50% of Avg. emoluments (last 10 months) X ------
66
50 64
= (------- x 19088 x --------)
100 66

= 9255.00 pm w.e.f. 01 / 07 / 2007 (Limited to min. & max. value)

(ii) DCRG (in Lumpsum)

Last Salary Drawn (Total Pay) X SMP


= ------------------------------------------------------
4

24624.00 X 64
= ( ---------------------------)
4

= 393984.00

=> 350000.00
(Limited to maximum Rs 3,50,000.00)
(Limited to 10 Lakhs as declared on 26 Jan 2009)

(iii) COMMUTATION (in Lumpsum)

= Commutation Percent of Full Pension x Age Factor x 12

= 40 % x 9255.00 x 10.46 x 12

= 464675.00

Amount Payable = 464675.00

(iv) REDUCED PENSION

= (Full Pension – Commutation Percent of Full Pension) + DA on full Pension


= (9255 – ( 0.4 x 9255)) + ( 0.29 x 9255)
= (9255.00 – 3702.00) + 2683.95 = 5553 + 2683.95
= 8237.00 (Date of restoration as per order.)

Note: The amount DA on Full Pension varies as per the DA fixed from time to time,
however only (full pension – commutation percent on full pension) is shown in the
order. In this case Reduced Pension = Rs 5553 /-
FAMILY PENSION CALCULATION

DCRG – If employee is dead before attaining his qualifying Service of Retirement, The
calculation of DCRG in such case is as follows –
DCRG = Total Pay X Multiplying Factor
Where Multiplying Factor varies as follows
Service Life MF

1 to 5 years 6
5 to 20 years 12
above 20 SMP / 2 (in case of death)
SMP / 4 (on retirement)

FAMILY PENSION

A) Total Pay = Basic Pay + Dearness Pay


B) 30 % of Total Pay = 0.3 X Total Pay
C) 2 ( or 1.5) X (B) [1.5 when WCA 1923 applicable ]
D) 50 % of Total Pay
E) Lowest of ( C ) & ( D )
F) Therefore Family Pension would be (E) till 7 years from the date following the death
or 65 yrs age of the employee whichever is earlier. And there after it would be (B)

FAMILY PENSION CALCULATION

S.No. Description Calculation Example


1 Total Pay Basic Pay + Dearness Pay 6765 + 3383 = 10148
2 30% of Total Pay 0.3 x A 0.3 x 10148 = 3045
3 2 (or 1.5) of B (1.5 if WCA 1923 applicable) 2 x 3045 = 6090
4 50 % of A 0.5 x A 0.5 x 10148 = 5074
5 Lowest of C & D ( check which is lowest) 5074
6 Family Pension till 7 = E ( till 29.05.2013) 5074
years from the date
following the death or 65
yrs age of the employee
whichever is earlier

= B (After 29.05.2013 3045

• In case of Voluntary Retirement, Weightage is given to the number of service years


left. A maximum of 5 years is given as weightage in Qualifying Service.

• In case Qualifying service is N years and 3 months then 1 extra SMP is added and if
it is N years 9 months then 2 extra SMP are added.