Why no increase in pension rate was recommended by 7th CPC

The staff side of the National Council of Joint Consultative Machinery (NC-JCM) has recommended that the Terms of Reference (ToR) of the 8th Central Pay Commission (CPC) shall include the examination of the existing structure of retirement benefits like pension and gratuity.

While central government employees are hoping that the 8th Pay Commission will review and revise the existing rate of pension and family pension, it is interesting to note that the 7th CPC had recommended not to increase pension rates from the then-existing levels. This article looks at why this happened.

The 7th pay commission received various representations from several entities demanding a raise in pension from the existing level of 50% of the last pay drawn.

Similarly, representation for increasing family pension from the existing level of 30% to 50% of the last pay drawn was also received. In the case of individual pension, several employees’ representatives even questioned the basis of determining pension at 50% of the last pay drawn.

However, the 7th CPC decided not to increase the rate of pension and family pension, saying the revision of the pay structure would lead to a significant increase in pay drawn by employees. Hence, a fresh revision of pension and family pension rates was not required.

"The Commission sought the views of the government in this regard. The Department of Pension and Pensioners Welfare stated that the VI CPC had recommended calculation of pension @ 50 percent of last pay or the average emoluments (for last 10 months) whichever is more beneficial. The Commission also recommended delinking of pension from qualifying service of 33 years. Effectively the dispensation on pension has already been liberalised by the VI CPC,” the 7th pay commission noted.

“Further the recommendations of this Commission in relation to pay of both the civilian and defence forces personnel will lead to a significant increase in the pay drawn and therefore in the ‘last pay drawn’/‘reckonable emoluments.’ Therefore the Commission does not recommend any further increase in the rate of pension and family pension from the existing levels," it added.

The 8th CPC is yet to be set up. In recent weeks, employees’ representatives and government officials have held meetings to discuss the potential terms of reference of the 8th pay commission.

It is expected that the 8th CPC will substantially increase the monthly take-home pay of central government employees and pensioners. The 8th CPC’s recommendations are expected to come into effect from January 1, 2026.