Anomalies In Pension Commutation

Ref: 2015/208                                                             July 19, 2015

The Chairman,

Indian Banks’ Association,

World Trade Centre, 6th Floor , Centre 1 Building,
World Trade Centre Complex,  
Cuff Parade,  Mumbai - 400 005.

Dear Sir,

Reduction of Commutation from the date of retirement                            in cases where Commutation amount is paid much later

The 10th Bipartite Settlement/7th Joint Note is signed on the 25th May, 2015 and Basic Pay and other allowances, counted for calculation of terminal benefits, including pension is also revised, as provided therein.  On account of upward revision of ‘Pay’ which is counted for pension, those retirees who have retired on or after 1.11.2012, Basic Pension is also going up.  Consequently, they are also entitled to commutation amount on the one third of increased portion of basic pension.  Banks are reducing this portion of Basic Pension, which is commuted, from the date of retirement, instead of reducing from the date of payment of this pension. Similarly, whenever there is delay in payment of a portion of Commutation, on account of decision of Courts, Errors in calculations, sanction of increments/revision in pay, etc. the Commuted portion of increased Basic Pension is also being reduced from the date of retirement.  This practice is causing a loss for such of our members who have received/are receiving a portion of commutation much later.  This portion could be reduced for a period of fifteen years only from the date of payment of commutation amount.  However, Commutation factor as on the date of retirement needs to be reckoned, as the Commutation amount has become absolute on the date of retirement and commutation of one third of ‘pay’ was sanctioned without quantifying the commutable amount. The Bank Employees’ Pension Regulations do not provide for such practice.  The Regulation 56 of Bank Employees Pension Regulations provides for reference to Central Civil Services (Commutation of Pension) Rules, 1981, in case of doubt.   Rule 6(1) b, 6(2) and 10(A) of Central Civil Services (Commutation of Pension) Rules, 1981 clearly provide for

1. Reduction of commuted portion of increased Basic Pension, for a period of fifteen years from the date of payment of such commuted amount;

2. Commutation Factor on the date of retirement is reckoned for calculation of Commutation amount.   

Relevant portions from Bank Employees’ Pension Regulations and Central Civil Services (Commutation of Pension) Rules, 1981 have been extracted and furnished here below for your ready reference.  

Banks may also refer to their practice in respect of reduction in commuted portion of increased Basic Pension of Central/State Government Pensioners, to whom these Banks are disbursing pension, on account of revision in terms of Pay Commission Reports, Court Orders, Government Orders, etc.  Any difference in methods of reducing commuted portion of pension of Central/State Government pensioners and Bank pensioners is impermissible in view of what is provided in Regulation 56 of Bank Employees’ Pension Regulations and  Rule 6(1)b, 6(2) and 10(A) of Central Civil Services (Commutation of Pension) Rules, 1981.

Therefore, we request you to kindly advise the member banks to reduce commuted portion of the Basic Pension from the date of payment of commutation amount only and not from the date of retirement.  As member banks are parties to Bipartite Settlement/Joint Note dated 25th May, 2015, it would be more appropriate, if they are advised to revise the system immediately.

Thanking you and with regards,

                                                                          Yours Sincerely,

                                                                               (S.C.JAIN)

                                                                     GENERAL SECRETARY

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Extracted from Central Civil Services (Commutation of Pension) Rules, 1981 :

6(1) The commutation of pension shall become absolute in the case of an applicant referred to

    .   .   .   .   .   .   .   .

Provided that –

(b) in the case of an applicant who is drawing pension from a branch of a nationalized bank, the reduction in the amount of pension on account of commutation shall be operative from the date on which the commuted value of pension is credited by the bank to the applicant's account to which pension is being credited.

.   .   .   .

(2) In the case of an applicant referred to in Rule 9 or Rule 10, the commuted value is paid in two or more stages, the reduction in the amount of pension shall be made from the respective dates of the payments as laid down in Clause (a) or Clause (b) of the proviso to sub-rule (1).

10 A. Restoration of Commuted Pension:

“The commuted amount of pension shall be restored on completion of fifteen years from the date the reduction of pension on account of commutation becomes operative in accordance with rule 6:

Provided that when the commutation amount was paid on more than one occasion on account of upward revision of pension, the respective commuted amount of pension shall be restored on completion of fifteen years from the respective date(s)”

Extracted from Frequently Asked Questions (FAQs) (Central Civil Pensioners)  (http://pensionersportal.gov.in/FAQ_Civil.pdf)

G.12.  What would be the age to be used for commutation of additional commutable pension and which factor would be used for such additional commuted value of pension ?

The age reckoned for calculation of commuted value of pension at the time of original application for commutation of pension will apply for calculation of commutation value of additional commutable pension. However, as mentioned in the OM dated 2.9.2008, the commutation factor in the revised Table of Commutation Value for Pension will be used for the commutation of the additional amount of pension that has become commutable on account of retrospective revision of pay/pension.

G.13     From which date the reduction in pension on account of additional commutation of pension will take effect?

Reduction in pension on account of additional commutation of pension will be in two stages as per the provisions contained in Rule 6 of the CCS(Commutation of Pension) Rules,1981.

G.14 What will be the date of restoration of additional commutation of pension?

The commuted portion of pension shall be restored after 15 years from the respective dates of commutation as provided in Government of India decision No.1 under the Rule 10 of CCS (Commutation of Pension) Rules, 1981. Necessary endorsement should be made on PPO.

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