Pension calculator: Here is how your retirement money is fixed

Pension calculator: Pension is a retirement benefit that an individual gets as a monthly income post-retirement. Usually, government organisations offer pension, and some large companies also offer this facility to their employees. Under pension plan, an employer contributes money to the plan while an individual is working. This amount is paid to you, usually as a monthly check in retirement, after you reach a specific retirement age. There is a formula that determines how much pension you will receive once you are retired. According to pensionersportal.gov.in, the formula a pension uses is based on a combination of following factors.

How pension is calculated

1. A Central government employee has an option to commute a portion of pension, not exceeding 40% of it, into a lump sum payment. No medical examination is required if the option is exercised within one year of retirement. If the option is exercised after expiry of one year, he/she will have to under-go medical examination by the specified competent authority.

2. The website further informs that lump sum payable amount is calculated with reference to the commutation table. The monthly pension will stand reduced by the portion commuted and the commuted portion will be restored on the expiry of 15 years from the date of receipt of the commuted value of pension. Dearness Relief, however, will continue to be calculated on the basis of the original pension--without reduction of commuted portion.

3. The formula for arriving for commuted value of Pension (CVP) is: CVP = 40 % (X) Commutation factor (X)12

Notably, the commutation factor will be with reference to age next birthday on the date on which commutation becomes absolute as per the New Table annexed to the CCS (Commutation of Pension) Rules, 1981.

According to the government website, minimum eligibility for receipt of pension is 10 years. A Central government employee retiring in accordance with the Pension Rules is entitled to receive pension on completion of at least 10 years of qualifying service.

In case of Family Pension, the widow is eligible to receive family pension on death of her spouse after completion of one year of continuous service or even before completion of one year if the government servant had been examined by the appropriate Medical Authority and declared fit for government service.

From January 1, 2006, pension is calculated with reference to emoluments--last basic pay, or average emoluments whichever is more beneficial. The amount of pension is 50% of the emoluments or average emoluments whichever is beneficial. 

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Currently, minimum pension amount is Rs 9000 per month, while maximum pension limit is 50% of the highest pay in the government of India per month, it added.