Central Government reviewing proposal to Reduce Pension Restoration Period from 15 to 12 Years
The central government is reviewing a proposal to reduce the timeframe for restoring the commuted portion of pensions for retired employees from 15 years to 12 years. The proposal has been brought forward by the Confederation of Central Government Employees and Workers, which represents around seven lakh employees across various departments.
Confederation’s Appeal to Cabinet Secretary
Last week, the Confederation sent a detailed letter to Union Cabinet Secretary TV Somanathan, requesting a re-evaluation of the pension commutation rules, which were last amended 38 years ago under Rule 10A of the Central Civil Services (Commutation of Pension) Rules, 1981.
The letter, signed by Confederation Secretary S.B. Yadav, emphasized that parameters influencing pension calculations—such as interest rates, life expectancy, and mortality rates—have drastically changed since the rules were framed in 1986. These changes, along with the reduced risk factor of just 2%, necessitate a fresh look at the commutation rules.
Recommendations from Expert Bodies
The Confederation highlighted recommendations from the 5th Central Pay Commission and other expert panels, which suggested reducing the restoration period to 12 years. It also pointed out that some state governments, such as Kerala and Gujarat, have already implemented shorter restoration periods of 12 and 13 years, respectively.
The Confederation also referred to the 1986 Supreme Court judgment in the Common Cause case, arguing that the ruling needs to be reconsidered in light of significant changes in economic and demographic factors over the last four decades.
Inconsistencies in Interest Rates
The letter criticized discrepancies in interest rates applied to pension commutation. While central government employees are charged an 8% interest rate, pensioners from institutions like LIC face a lower rate of 6.1%. The Confederation urged the government to address these inconsistencies to ensure fairness.
Welfare Over Profit
The Confederation argued that pension commutation should be viewed as a welfare measure rather than a profit-driven one. “The government, as a model employer, should prioritize the welfare of employees who have served the nation for over 30 years. The policy should reflect compassion towards pensioners and not aim at profit-making,” the letter stated.
Legal and Policy Implications
The Confederation noted that the central government has neither accepted nor rejected the 5th Pay Commission’s recommendation for a 12-year restoration period, which gives the proposal a unique legal status. It urged the government to amend the Central Civil Services (Commutation of Pension) Rules, 1981, and implement a revised commutation table that aligns with current realities.
Conclusion
The Confederation concluded its appeal by stating that a 12-year restoration period would bring much-needed relief to pensioners. It called for immediate action to update the rules to reflect the evolving socio-economic landscape and ensure fairness for retired central government employees.
