What does the new proposal say?
Based on the 5th Central Pay Commission (CPC) report, the Confederation of Central Government Employees and Workers has requested the central government to reduce the time period of commuted pension from 15 years to 12 years.
The Confederation of Central Government Employees and Workers including 7 lakh employees from various central departments wrote a letter to Union Cabinet Secretary TV Somanathan asking him to reconsider the pension commutation rules. These rules were enacted 38 years ago by amending the Rule 10A of Central Civil Services (Commutation of Pension) Rules, 1981.
Confederation Secretary SB Yadav mentioned in his letter that current parameters have changed from those in early 1986. This applies particularly to interest rates, mortality rates, life expectancy, death rate, risk factor, and actual values which is just 2%. The letter referred to the 5th Central Pay Commission (CPC) report and recommendations for reducing the time period of commuted pension from 15 years to 12 years.
The Confederation also attached a detailed note in their letter which explains why the Supreme Court's 1986 judgement on common cause needs to be revised as many parameters have changed in the last 38 years. The letter mentioned that parameters such as commutation factors, rate of interest, life expectancy, mortality, and death rate have significantly changed in the last four decades.
The letter of the Supreme Court's 1986 orders clearly states: “Now that 38 years have passed, a fresh start is required in this matter, and request your good self to re-examine the whole 1986 orders."
The note of the Confederation said: “Though commutation is optional, the central government acts as a 'Model Employer' and should view this as a welfare and not as a profitable measure. The pensioner will avail this commutation for their financial commitments only. The central government's policy towards their employees has served the nation building more than 30 years of service which should be sympathetic to employees, especially pensioners. As a model employer, the central government's concept of making a profit on this issue should not be the criteria for reducing the commuted value of the pension."
After an in-depth study, the report of the 5th Central Pay Commission recommended a 12 year time period for commuted pension. However, the central government has neither accepted nor rejected this report, providing an explanation that has gained legal significance.
With the recommendations from expert bodies, some state governments have restored employees' commuted pension to 12 years. States like Kerala have adopted 12 years of restoration for commuted pension while Gujarat's state government has issued 13 years of restoration.
The letter of Confederation also pointed out some inconsistencies in the interest rates that were applied to the calculations of commuting pensions. While employees of the central government are charged an 8% interest rate, pensioners from LIC or other financial institutions are charged a lower rate of 6.1%
The confederation of employees and workers has requested the central government to take action to the amendments of the Central Civil Services (Commutation of Pension) Rules, 1981, and implement a revised commutation pension table.
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Gerry Wollheim
12 January, 2025