The Centre has received a proposal from the Confederation of Central Government Employees and Workers for reducing the timeframe for restoration of the commuted portion of pension from 15 years to 12 years.  

The confederation, which represents about 700,000 staff across various central government departments, wrote a letter to Cabinet Secretary T.V. Somanathan last week and requested him to make the change in the pension commutation rule and make an amendment in Rule 10A of Central Civil Services (Commutation of Pension) Rules, 1981. 

Confederation secretary S.B. Yadav wrote in the letter that in comparison to the parameters prevailing earlier since 1986, the current parameters have undergone a drastic change, especially, the rate of interest, life expectancy, mortality rate, death rate, actual values, and risk factor. 

The letter also highlighted the 5th Pay Commission analysis and recommendations by various expert bodies that have advised a reduction in the timeframe for restoration of commuted pension to 12 years from 15 years. 

The Confederation also attached a detailed note, explaining why the Supreme Court judgment in Common Cause (supra) of 1986 needs another look into the matter. 

“Now that 38 years have lapsed, a fresh look into the matter is required, and request your good self to re-examine the whole issue of the 1986 orders,” the letter said, referring to the Supreme Court’s 1986 order. 

“Though the commutation is optional, the government being a ‘Model Employer’, should view this as a welfare and not as a profit-making measure. The pensioner avails the commutation for their financial commitments only. The policy of the government towards its employees who have served for nation building for more than 30 years of service should be sympathetic towards its employees, particularly, pensioners. As a model employer, the concept of profit-making for the central government on this issue should not be the criteria for fixing the commutation factor and restoration of commuted value of pension,” the letter added.  NSE: World's Largest Derivatives Exchange For 5th Year, Ranks 3rd Globally In Equities Segment

Expert Recommendations 

Incidentally, some state governments have restored employees’ commuted pension after 12 years following recommendations from the expert bodies. Kerala has adopted a 12-year restoration timeframe, and very recently, the Gujarat government has also issued a 13-year restoration timeframe.  EPFO’s Centralized Pension Payments System Launched Across Regional Offices In India

5th Pay Commission Report 

The 5th Central Pay Commission’s report has recommended a 12-year restoration of commutation timeframe after a thorough study. However, the Centre has not accepted or rejected the report.  This TRAI Rule Is Likely To Lower Your Mobile Phone Bill:  Check Details

Financial Inequities 

The letter also highlighted the inconsistencies in the rate of interest applied during the commutation calculations. While government employees are charged a rate of interest of 8 per cent, pensioners from the Life Insurance Corporation (LIC) and other financial institution are charged a rate of interest of 6.1 per cent. 

The Confederation has urged the Centre to consider amendments to the Central Civil Services (Commutation of Pension) Rules, 1981, and release a revised commutation table.  

“A 12-year restoration period reflects current realities and would bring much-needed relief to pensioners,” the letter further said.