Calculating commutation of pension on voluntary retirement (VR)

Railway Board Letter No
2006/ACII/21/8 dated 09-11-2006
Date
Circular Subject
Commutation of pension on voluntary retirement.

 

Enclosed please find copies of Department of Pension and Pensioners’ Welfare, Ministry of Personnel, PG & Pension’s  O.M. No. 34/3/2006-P&PW[G] dated 29-06-2006 and letter of even No. dated 27-09-2006, on the above subject, which are self explanatory.  It is requested that special checks may be organized on your Railways to rule out similar instances of excess payment to employees.  The amount overpaid, if any, may be recovered from the pensioners besides fixing responsibility for incorrect calculation of commuted value.  A feedback on the action taken in this regard may also be sent for Board’s information.

 

Copy of Department of Pension and Pensioners’ Welfare, Ministry of Personnel, PG & Pension’s  O.M. No. 34/3/2006-P&PW[G] dated 29-06-2006

 

Sub:  Commutation of pension on voluntary retirement.

     1.  It has been brought to the notice of this Department that in certain cases where Central Government employees have taken voluntary retirement a few days before the date of their Superannuation, the commuted value of pension has been calculated by using the higher commutation values than those actually applicable without taking into consideration the age on the next birthday of the retiring employee, thus, causing considerable financial loss to the Government.

 

2.    In such cases the Commuted value of pension does not appear to have been computed according to the provisions of Rule 6 and Rule 8 of CCS [Commutation of Pension] Rules, 1981.  Rule 6 ibid, clearly stipulates, inter alia, that the commutation of pension becomes absolute on the date following the date of retirement.  Further, according to Rule 8 ibid, the lumpsum payable to the retiring Government Employee is calculated in accordance with the prescribed commuted values in consonance with the age on his/her next birthday and such values are applicable on the date on which the commutation becomes absolute. 

 

3.    All such cases where above procedure has not been followed and lumpsum of commuted value of pension has been paid in excess of what would have been due may be reviewed immediately and the excess amount wherever paid, may be recovered from the pensioners according to the relevant rules along with interest at the prescribed rates.  The details of such cases along with details of excess amount recovered / to be recovered therefrom may also be sent to this Department within a month. 

 

4.    All Ministries /Departments may take appropriate departmental action against the erring officials who were /are responsible for wrong calculation of commuted value of pension and excess payment thereof causing financial loss to the Government.

 

5.    All Ministries / Departments may kindly ensure that such discrepancies do not re-occur.

 

Copy of Department of Pension and Pensioners’ Welfare, Ministry of Personnel, PG & Pension’s O.M. No. 34/3/2006-P&PW[G] dt. 27-09-2006 addressed to Director Finance [CCA], Min. of Rlys., Rly. Board.

 

         Sub:  Commutation of pension on voluntary retirement.

 

Please refer to your letter No. 2006/AC-II/21/8 dated 31st August, 2006 on the subject mentioned above.

 

2.    It has been brought to the notice of this Department that in certain cases where Central Government employees have taken voluntary retirement a few days before the date of their superannuation, the commutation of pension has been calculated by using the higher commutation values than those actually applicable without taking into consideration the age on the next birthday of the retiring employee, thus, causing considerable financial loss to the Government.

 

3.    To make above OM clear, an illustrative calculation has been made as under:

 

Suppose Mr. X working as a Group ‘A’ officer in Central Government in pay scale of Rs.14300-18300 has taken voluntary retirement just 2 days before his actual date of Superannuation, his department has computed erroneously the amount of Commutation of Pension as under:

 

Basic Pension                         :  Rs.7300/-

Date of birth                                        :  5th June, 1945

Date of Superannuation                      :  30th June, 2005

Date of Voluntary Retirement :  28-06-2005

 

Calculation of value of commutation of Pension

[a]   [ 7300 X 40% ] X12 X 10.13 = Rs. 3,54,955 *

 

*This is an incorrect amount of commuted value of pension.

 

The correct amount should have been as under:

 

[b]   [ 7300 X 40% ] X 12 X 9.81 = Rs.3,43,742

 

Thus an excess amount of Rs.11,213/- was paid.

 

4.    Higher commutation factor is applicable if Mr. X would have taken voluntary retirement before his actual date of birthday [i.e. 05-06-2005].  In case Mr. X takes voluntary retirement after the date of birthday, a lower commutation factor would be applicable as per Commutation Table.