Why the commuted pension is restored after 15 years, not 12 years

Central government employees have the option to convert or commute up to 40% of their pension into a lump sum payment on retirement. This facility can be used if an employee needs a lump sum immediately after retirement or even later.

When an employee opts for commutation, his/her monthly pension is reduced by the portion commuted. However, the commuted portion of the pension is restored after 15 years.

Central government employees have long been demanding the restoration of the commuted pension after 12 years. However, this demand has remained unfulfilled. Why? Because the last two pay commissions didn't feel any need to change the existing rules for commutation of pension. In an old judgement, even the Supreme Court has allowed the restoration of commuted pension only after 15 years.

Brief history of commutation of pension rules

Before the 5th pay commission, the commutation allowed was one-third. However, no restoration benefit was available to retired employees.

The 5th Pay Commission recommended increasing the percentage of commutation to 40% and proposed the restoration of pension after 12 years. However, the government did not accept the latter recommendation.

In a judgement dated December 12, 1986, the Supreme Court also allowed restoration of pension after 15 years. The 7th Pay Commission stated this in its report, saying, "The apex court noted that though the amount is recovered in 12 years, yet since there is a risk factor and some of the states are restoring pensions after 15 years, the period of restoration is fixed at 15 years."

Later, the 6th and 7th pay commissions did not recommend any change in the maximum percentage of commutation allowed or in the period of restoration.

Current demand

Even as the 8th pay commission is yet to set up and start its work, there have been demands from central government employees' representatives for the restoration of commuted pension after 12 years.

The staff side of the National Council of Joint Consultative Machinery (NC-JCM has suggested including the restoration of commuted pension after 12 years as one of the terms of reference of the 8th pay commission.