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Friday, May 12, 2017

Orders for “Notional Pension Fixation Formula” under the 7th Pay Commission regime, as approved by the Cabinet, issued

As all are aware, the 7th Central Pay Commission (CPC) had recommended two formulae for calculation of pension of pre-2016 retirees. While the first formula involved calculation of pension based on a notional basis, the second involved the multiplication of old 6th CPC pension X 2.57. The orders for the second formula were issued earlier and the first formula was recently accepted with certain modifications by the Cabinet.

The Government of India has today issued orders for calculating pension based on the first formula for civil pensioners who retired prior to 2016 and similar orders for defence pensioners shall be issued separately since military pensions involve certain additional complexities as compared to civilians. Pensioners shall be entitled to receive the higher pension out of the two formulae.

The revision shall be undertaken by notionally fixing the pay in the pay matrix recommended by the 7th CPC in the level corresponding to the pay in the pay scale/pay band and grade pay at which such pensioners had retired (for pension) or died (for family pension). This will be done by notional pay fixation under each intervening Pay Commission based on the Formula for revision of pay.

The pension under the new dispensation shall also be allowed from 01-01-2016.

The new orders can be accessed and downloaded by clicking here.

Again, please DO NOT mail me individual queries on email or social media. You are free to discuss the above @ the comments section of this post.

Thank You.

1 comment:

ashwanisarda said...

Dear Maj Navdeep,

Thank you, once again, for this exceedingly useful input.

There is no basis for generalizing, but one first impression is that, as per the examples given in Annexure-I to OM (as linked to in the blog post), if a pensioner retired under pre VI CPC regimes (before Jan 2006), his notional pay fixation is such that there is no increase in his pension over that fixed by VII CPC Method 2 (Option 1) i.e. 2.57x.

But if a pensioner retired after 01 Jan 2006, the notional pay fixation gives rise to a significant increase in pension over the one fixed by the 2.57x formulation.

This appears to be in need of a detailed study. The text of para 4 of said OM assumes significance where it states, "This will be done by notional pay fixation under each intervening Pay Commission based on the formula for revision of pay..".

A very bare-bones comparison could be made between respective re-fixed 7 CPC pensions of two categories of retirees in the same equivalent pay-scales/paybands and with the same number of years of service i.e. re-fixed pensions of those retiring before 01 Jan 2006 and of those those retiring after 01 Jan 2006 but before Jan 2016. That might yield some meaningful information on parities.