Health

Pension calculation formula for central govt employees

Dr. David K Simson

The Government of India has laid down the Pension rules in favor of central government employees, thereby allowing them to be eligible for pension income post completion of 10 years of qualifying service. In India, there are about 62.03 lakh pensioners and more than 48.41 lakh employees of the Central Government. As the government has been on a hiring spree and at the same time the number of fresh retirees is also increasing, the total numbers of overall pensioners have been on the rise. The government has released the pension calculation formula for central government employees to maintain transparency and for the pensioners to calculate the approximate pension income on their own. 👀

It is common knowledge that a Central Government employee is eligible for pension only after completing 10 qualifying years of service. In the case of family pension, the widow of the deceased employee is rightfully eligible to receive the pension amount upon successful completion of one year of service. There is an exception to this case; the widow will be eligible to receive the amount before the period of completion of one year if the said Government servant had been deemed fit for the service and examined under the supervision of the appropriate Medical Authority.

It is to be noted that to be fit and healthy to sustain working for 10 successful years, several insurance policies are available in the market. The central government employees can check out the Group medical insurance plans offered by Plum Insurance. Plum Insurance takes care of all the needs and basic requirements and boasts a smooth, hassle-free experience of insurance policies. This goes a long way to be secure in terms of medical health and provides a great sense of relief while working for such a long run that when required, the medical needs will be timely met.

Calculation Methodology – Pension Calculation Formula For Central Govt Employees as per 7th CPC- 💡

  • It is to be noted that the Pay Commission affects the pension as well as the salary.
  • As per the guidelines issued by the Government, the Pension calculator can be utilized to calculate the pension of the employees retiring before 1st January 2016. The computation will be based on the rules of the 7th pay commission.
  • The 7th Central Pay Commission has released the formulations in two sets – one for employees retiring before 2006 and the other for those who have retired before 2016
  • The basic check to be conducted is of the earned increments. The records of all the pensioners are to be verified to tally with the qualifying period of service.

7th CPC – Recommendations for fixing of Pension 🔍

The 7th CPC lays down the guidelines as – All the civilian personnel, including CAPF retiring before 1st January 2016, shall be registered in the pay matrix as per the recommendation of the CPC. The pension pay will be derived based on the Grade Pay and the Pay Band at which they took the retirement plunge. It will be the minimum of the corresponding level as available at the matrix.

  1. The recommendation of the CPC states that the notional amount of pay shall be arrived at by including all the increments the employee has had at that level of service at a fixed rate of 3%. About 50% of this amount shall be considered the revised pension.
  2. The alternative to the above recommendation is that – the pension amount as arrived after following the 6th CPC guidelines will be multiplied by 2.57. The resultant amount will be the revised pension amount.

Old Pension Scheme and the National Pension System

OPS and NPS: To utilize the pension calculation formula for central government employees, the classification of employees is supposed to be done between the OPS and NPS.

To classify the employees under the old and national pension system, the below point needs to be understood –

The employees who have been appointed on or before 31st March 2003 are covered under the Old Pension Scheme. Employees appointed after 1st January 2004 will be covered by the National Pension System (NPS).

Now that we have a fair idea of how the employees will be classified based on their appointment date, let us dig in to understand the concept of minimum pension.

Minimum Pension Concept 📄

  • Unlike the guidelines being issued for computation of revised pension amounts – the Government has not explicitly laid out the computation of minimum pension under any of its pay commissions. It is a direct method wherein the minimum pension is 50% of the Minimum Wage.
  • Even though there is no specific rationale behind the computation of the percentage. In an adequate manner of working, 100% of the minimum wage will be equivalent to the amount set for Minimum Pension.
  • Another concept of Need-Based Minimum Wage can be explained as the bare minimum level required to be paid off to the worker for their family’s survival. It simply states that beyond this level of wage, the worker’s family will not sustain or perform the required job.

The Monthly Pension (Basic Pension) Formula is as follows –

The basic pay does not comprise any allowances. The basic pension can be computed by considering 50% of the Last Drawn Basic Pay of the central government service.

Formula – Basic Pay / 2 = Basic Pension ✔️

It is to be noted that to be fit and healthy to sustain working for 10 successful years, several insurance policies are available in the market. The central government employees can check out the Plum Insurance Group medical insurance plans offered by Plum Insurance. Plum Insurance takes care of all the needs and basic requirements and boasts a smooth, hassle-free experience of insurance policies. This goes a long way to be secure in terms of medical health and provides a great sense of relief while working for such a long run that when required, the medical needs will be timely met.