Government Changes Pension Rules! PSU Employees Dismissed for Misconduct Will Lose Retirement Benefits

The Central Government has made an important change in pension rules that affects employees working in public sector undertakings (PSUs). According to the new rules, if a PSU employee is removed or dismissed from service because of misconduct, they will lose their retirement benefits—even for the time they worked under the Central Government before joining the PSU.

This update comes from the Central Civil Services (Pension) Amendment Rules, 2025, which were officially notified on May 22 by the Ministry of Personnel. These new rules make a key change in the Central Civil Services (Pension) Rules, 2021.

What Has Changed?

Earlier, if a government employee was absorbed into a PSU and was later dismissed or removed from the PSU for any misconduct, their government service pension was not affected. But now, any misconduct after absorption in the PSU can lead to full forfeiture of retirement benefits, including the pension earned during government service.

However, the rules also say that such a dismissal or removal can be reviewed by the administrative ministry in charge of the PSU. This means the decision is not final and may be reconsidered depending on the case.

The updated rules also bring in other pension-related provisions for employees who are removed, dismissed, or retrenched:

• The concept of “pension and family pension subject to future good conduct” will now apply to these employees.
• The provision for “compassionate allowance”, which is a partial pension granted in special cases, will also be applicable.

Who Will Be Affected?

These rules apply to Central Government employees who were appointed on or before December 31, 2003. However, they do not apply to:

• Railway employees
• People hired on casual or daily-wage basis
• Officers of IAS, IPS, and Indian Forest Service (IFoS)

Why It Matters

This change is significant because it gives PSUs more authority in disciplinary matters. At the same time, it warns employees that any misconduct can have serious financial consequences—even affecting the retirement benefits they earned while working for the government.

It also ensures stricter accountability for PSU staff, especially those who were absorbed from central government jobs.