Central Government Employees Pension Revision: Two formulas for old retirees and government reaction - Explained

Central Government Employees Retirement Benefits: Central Government Employees Pension - Implementation of the 7th CPC recommendations put a lot of money in the hands of central government employees and pensioners too. While those in the service, or who retired after the implementation of the pay panel report, benefitted, others, who had retired earlier, were concerned about their benefits. The pay commission, however, addressed their concerns by recommending a set of pension formulation and left it for the government to decide on the further course of action. Here's a look at what the pay panel recommended and how the government reacted. 

The Gazette notification dated August 4, 2016, said that the pay panel was tasked "to examine the principles which should govern the structure of pension and other retirement benefits, including revision of pension in the case of employees who have retired prior to the date of effect of these recommendations (of 7th CPC)." The pay panel had to make its recommendations while keeping in view the fact that the retirement benefits of all Central Government employees appointed on and after 01.01.2004 were covered by the New Pension Scheme (NPS).

Here's pension formulation for civil employees including CAPF personnel, who have retired before 01.01.2016, recommended by the pay panel: 

Pension Formula 1: The pay commission said, "All the civilian personnel including CAPF who retired prior to 01.01.2016 shall first be fixed in the Pay Matrix being recommended by this Commission, on the basis of the Pay Band and Grade Pay at which they retired, at the minimum of the corresponding level in the matrix." 

The panel further said that this amount "shall be raised, to arrive at the notional pay of the retiree, by adding the number of increments he/she had earned in that level while in service, at the rate of three per cent." As much as 50 per cent of the total amount so arrived shall be the revised pension, it said.

Pension  Formula 2: The panel recommended that the pension fixed at the time of implementation of the VI CPC recommendations would be multiplied by 2.57 to arrive at an alternate value for the revised pension.
The pay panel recommended that the pensioners could be given the option to chose from any of the two formulas. It, however, noted that the implementation formula 1 may take some time. Hence, in the first instance, formula 2 can be used to calculate the revised pension and paid as an "interim measure". Further, if the amount, after calculation on the basis of formula 1, turns out to be higher, then the difference may be paid to the pensioners subsequently, the panel said. 

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Government reaction

The government said that both the options recommended by the 7th CPC shall be accepted depending on the "feasibility of the implementation". It also said that the implementation of formula 1 would be implemented immediately.