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Thursday, September 17, 2009

Very Important : Last opportunity for commutation of additional pension for defence personnel who retired between 01-01-2006 and 02-09-2008

Personnel who retired between 01 Jan 2006 and 02 Sept 2008 had availed their commutation of pension at old rates and at the old percentage. The Sixth Central Pay Commission had enhanced the percentage of commutable value to 50%. As a result, some personnel who had retired prior to the announcement of the acceptance of the 6th CPC had gone home with a commutation value at 5th CPC rates and at a lesser percentage. The Govt had then granted an option to such retirees to opt for the new rates if they so desired. Due to lack of circulation of this option, coupled with lack of knowledge of the issue, many did not exercise the same. The problem was compounded by the fact that no cut-off date or last date for exercising the option was mentioned in the letter issued by the Govt of India.

The Ministry of Defence has now decided that the said option for additional commutation may be exercised by such left out retired personnel by 10 October 2009. Those who do not exercise the option by 10-10-2009 would be deemed to have refused the additional commutation.

The entire circular of PCDA(P) on the issue alongwith the Govt letter dated 10-09-2009 on the subject can be accessed and downloaded by clicking here.

Please spread the word since there shall be no separate communication to defence personnel on the issue.

The earlier letter dated 12-11-2008 detailing the modalities of commutation after the 6th CPC can be accessed by clicking here. (Please refer to Para 9.3 of this)

The option certificates and corrigendum of the above mentioned letter dated 12-11-2008 can be accessed by clicking here.

Once again the same request : Please do not email me individual queries or doubts on calculations on the above, my profession does not allow me the luxury of such time. You are most welcome to post your queries / doubts as comments to this post. Thanks.


Doc Rajeeva said...

Dear Sir,
Good that they have remainded about the avaialbility of options for new commutation for the HANGING RETIREES..and a cut off date has been decided. Masny who had missed it would benefit.THANK YOU FOR THE TIMELY REMAINDER.

Further is there is any news on acceptance of Recommendations of Committee of Secretaries reg Full Pension of Retirees between 01 Jan 06 to 02 Sep 08..still a pending issue..please post the latest on the subject as many would be interested to know the information....Doc Rajeeva

Anonymous said...

navdeep, where would we be without you ?

Lt Col MS Dhillon said...

While commutation is good, two things must be noted. Firstly the rate of commutation ie the multiplication factor has been grossly reduced from the previous one which greatly reduces the cash in hand. In my case earlier it was 14.64 and now it is 8.99. Secondly if you exercise the option to take 50% your age next birthday will be calculated at the current time and not as per the calculations when you retired in 06/07/08. If you take the option of 43% then the same age will be used as used earlier. Please do a little calculation before you exercise your option.

Anonymous said...

Navdeep, As per the orders issued by PCDA for commutation option, even this option can be exercised after 10 Oct 09 also but it would lead to additional complication of Medical etc. I would request all the veterans, to exercise the option very carefully and after due diligent, because each option has its own limitation on case to case basis. There is no option which can be stated as most benifical and general in nature.

Unknown said...


Hi! Navdeep,


Here we go: -

1. Current Pension with OLD 43% Commutaion : Rs 35000/= (for COL)
2. Current Pension with 50% Commutaion : Rs 25000/= (for COL)
3. Difference : Rs 10000/ per Month
4. Additional Commutation money received with 50% Commutation = Rs 10 Lakhs
5. Additional Arears of Pension received without Commutation = Rs 2 Lakhs
(note: Those who don’t commute will get additional PENSION AREARS of Rs 2 Lakhs)
6. Difference = Rs 8 Lakhs (Rs 10 Lakhs – Rs 2 Lakh)
7. Rs 8 Lakhs will give you Rs 5000/= per month after TAX DEDUCTION which is added to Monthly Pension of Rs 25000 + Rs 5000 = Rs 30000 per month
8. Effectively those who DONOT COMMUTE will get Rs 5000/= per month more
(Note : Rs 35000-Rs 30000= Rs 5000)
9. Rs 5000/= per month x 12 month= Rs 60000/- per year
10. Rs 60000/= per year INVESTED in PPF (PUBLIC PROVIDENT FUND) for 15 years becomes Rs 20 Lakhs
NOTE. Rs 70000/= (Rupees Seventy Thousand per year), which is the maximum permissible limit in PPF becomes Rs 22.5 LAKHS AFTER 15 YEARS.

Col Pradip Dax

Current Appointment : All India Corporate Head, Le M

17 Sep 09

Anonymous said...

Col Pradeep Sir, But where did you adjust the capital of Rs 8 Lacs which you recd on account of additional commutation. So total benefit would be 20Lac-8Lac=12 Lacs. Means 12 Lacs in 15 Yrs. Rs 80000/- per annum and around 6600 Rs per month. Gr8..

Pied Piper said...

@ Col Pradeep

Good Job Sir,

But I wonder, what would I possibly need all that money for when I am 75 yrs young. I would rather take a world tour while I am still alive.

They would be many who may also need additional funds for housing and social obligations.

Finally, what would be the worth of Rs 20 lacs after 15 yrs. With a moderate inflation the worth of Rs 20 lacs today would be reduced to around 5-6 lacs after 15 yrs.

Anonymous said...

@ Col Pradip,

Those 10 Lac you get when you commute ,if invested wisely ,would at the most conservative of estimates would become around 30 lac after 15 years whereas if you don't commute you would get around 5000 extra every month over a period of 15 years with inflation reducing the buying power of that 5000 every month over those 15 years.
So, with inflation factored in , those 10 lac in your hand today are worth much more than that money spread over 15 years.
This is as per my understanding of the subject. Final call rests with you.

Anonymous said...

Yes i agree with annonymous5:04.

Anonymous said...

the fight should be to restore earlier table i do not know why trade unions are silent

Lt Col MS Dhillon said...

Refer serial 5 of Col Pradeeps calculation. Why those who dont commute will get additional arrears of pension. Arrears would be the same for both cases as commutation becomes effective from the date the commutation money has been recieved by the pensioner. Thus if you recieve the commutation money this month the commutation amount should only be deducted from your pension this month onwards. For the period from 01/01/06 to Aug 09 the fresh commuted amount will not be deducted from your pension. Please refer Commutation Rules 1981 at http://persmin.nic.in/pension/rules/pencomp-app1.htm

His calculation are also not correct because although you may get more money per month as pension if you dont commute vis a vis the money you can generate per month out of standard saving investment, but he is not counting the fact that at the end of 15 years you will also have this capital of Rs 10 lakhs with yourself.

Anonymous said...

The revised commutation option can be exercised after 10 Oct 09 also as per PCDa letter.
In that Case, people should choose the revised commutation after they get the 6CPC dues. Because after that the date of commutation will only change. Since the commutation table is figured in such a way that it would not result any substanstial less amount. But in this case, person would receive the full areers of the pension then post date commutation amount. Dono Hath Main Ladoo, is not that?

Lt Col MS Dhillon said...

Refer last anonymous comment, the arrears will not reduce if your commute. Commuted amount of pension is to be reduced from pension only after you recieve that amount.

Your arrears are to be calculated month wise based on pension due now(without subtracting the commuted amount) minus what you have recieved.

I would advice every one to make a table month wise in an excel sheet. Once again I reiterate that the new commuted part is only to be reduced from pension due after you have got the amount in your bank

Anonymous said...

Dhillon Sir,
Absolutely Right. Mine is the case, i took release from service on 29 Oct 06, since it was pre-realease, Air Force took 10 months time to issue me PPO. In that case from 29 Oct 06 to till date PPO receipt, I recd the full pension and from date of receipt of PPO, my commutation amount started detecting and residual pension was credited.

subhash said...

Dear All,
The para 6.1 ( b) for Officers :The said letters is discriminatory , illogocal & amounts to creating a sub category with in the retired persons who retired after 1.1.2006 but before 1.1.2009.
Logical is : if the Govt machinery is late in clarifying & issuing letter that after 20 years you will get full pension then why should those who retired between 1.1.2006 & 1.9. 2008 suffer?
Can any one please clarify?
Maj Navdeep, we all are very grateful to you. You being a lawyer , will it stand scrituny in court.?
Please revert.
SC Dhull

Major R Kumar said...

Dear Sir.
I have sent my option for commutation as per annexure II to CDAO on 21 jan 09 itself.But as u know how they work.they have not calculatedmy lpc.I retired as major on 19 mar 07 after 22 yrs of service including pre commission service,I have sent the option again by email and speed post along with copies of previous letters /option..Hope they get it.If not then .god help

major Rk

Anonymous said...

Dear Navdeep,
PCDA does not acknowledge any receipt of the option.I had sent the option twice but they say it has not been received.Request impress upon PCDA that ack be given.
Lt Col DK Mitra (retd)

subhash said...

Dear All,
Blog of Maj Navdeep who is doing a commendable job.
There various reasons are given for saying Yes OR No for 50 % commutation..
There is another view , the Industry view:
Say you get Rs 8 Laks extra because of this 50 % commutation.
Now what is the present cost of raising this 8 lakhs from market.
It would be any thing from 9 to 10 % of interest rate.
But we would be drawing only Rs 5000/- less per month in pension.
So equating it to House Loan Or Car loan for 15 years ,
the Costing is much cheaper.
Hence Go for it.

Regarding , the point on page 6 , Para 6.1 ( b)
that is not giving us full pension can be challanged in Court.
Why are they ( Govt ) asking us to give option for Commutation where as the Pension provision is decided against a few hundred officers & PBORS retiring prematurely between 1.1.2006 & 1.1 2009.
So even this can be taken to its logical conclusion.
Can any one please leave a comment?
S C Dhull

Anonymous said...