Commutation Relief In Sight? Panel Likely To Review 15-Year Deduction Rule

The 8th Pay Commission is likely to take effect from January 1, 2026, paving the way for a salary hike for lakhs of central government employees and pensioners. The government announced the 8th Pay Commission on January 16, 2025. However, the formal appointment of its chairperson, members, and the issuance of detailed Terms of Reference (ToR) are yet to be finalised.

Other than that, employees and pensioners have a major pending demand for the upcoming 8th pay commission. They are hoping that the commission will reduce the commuted pension to 12 years from 15 years, offering a big relief against the rising medical and inflationary costs.

The National Council (JCM) – Staff Side, which represents central government employees, has sent a list of demands to the government, according to a report of Financial Express. The 12-year restoration is one of the top issues in that list.

This point was also raised during the SCOVA (Standing Committee on Voluntary Agencies) meeting held on March 11, 2025, which was chaired by the Minister of State for Personnel.

What Is Commuted Pension?

At the time of retirement, employees have the flexibility to take a portion of their monthly pension in a lump-sum amount. The government will then deduct that portion from their pension every month to recover the amount. This is called commutation.

Right now, the deduction continues for 15 years, after which the full pension is restored.

Why Is There A Demand To Reduce To 12 Years?

Unions and Pensioners argue that 15 years is too much given the rising medical costs and living expenses. With the drop of interest rates, retirees, they argue, lose a good part of their pension money.

As discussions around the 8th Pay Commission continue among central government employees and pensioners, reports suggest that its implementation is likely to be delayed from the earlier expected date of January 1, 2026.