7th Pay Commission New Table for Commutation of Pension
Commutation is one of the retirement benefits for Government employees to sell a particular percentage of basic pension on an optional basis.
Every Central government employee has an option to convert a particular portion of basic pension (maximum 40%) as a one-time lump sum amount instead of a monthly basis.
The value of the commutation of pension will be calculated based on the Commutation Table. The Commutation table is stated from the age of the next birthday of 20 with the factor of 9.188. The table shows the factor for 61 age of next birthday is 8.194. And the last column of 81 age of next birthday factor is 4.611.
As per the CCS (Commutation of Pension) Rules, 1981, the commutation factor is applicable to the age of next birthday on the date of retirement. And the formula for calculating the value of the pension is as follows…
40 percentage of basic pension x Commutation Factor x 12
[Effective from 1st march, 1971
Commuted Value = 0.4 (Maximum) x Pension x Commutation Factor x 12]
Commutation Factor Table for Central Government Employees
Two types of commutation tables are available for Central Government employees. One for retired before March 1971 and another table for retired after 2006.
COMMUTATION OF PENSION: Armed Forces Personnel shall be entitled to commute for a lump sum payment upto 50% of their pension. The revised Table of Commutation Value for Pension will be used for all commutations of pension, which become absolute on or after 02.09.2008.
|Age next Birthday||Commutation value expressed as number of year’s purchase|
Rate of Interest for Commutation
Commutation values for a pension of Rs. 1 per annum as per 6th CPC recommendations, effective from 1.1.2006. The table is based on a rate of interest on Commutation of Pension is 8.00% per annum.
Commutation values of a pension of Rs. 1 per annum, effective from 1.3.1971. The table is based on a rate of interest on Commutation of Pension is 4.75% per annum.
TABLE FOR COMMUTATION VALUES FOR A PENSION OF Re. 1 PER ANNUM
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|Age next Birthday||Commutation value expressed as number of year’s purchase||Age next Birthday||Commutation value expressed as number of year’s purchase||Age next Birthday||Commutation value expressed as number of year’s purchase|
[Basis: LIC (94-96) Ultimate Tables and 8.00% interest]
Explanatory Note : Due to implementation of the recommendations of the sixth Central Pay Commission, it has become necessary to give retrospective effect to the proposed amendments from the date from which the recommendations of the Sixth Central Pay Commission were given effect to. It is certified that the interest of no person is adversely affected by giving retrospective effect to the proposed amendments.
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The revised Table of Commutation Value for pension, appended to these rules shall be used for all commutation of pension which becomes absolute from the 2nd September, 2008 and in the case of pensioners whose commutation of pension became absolute on or after 1st January, 2006 but before 2nd September, 2008, the pre revised Table of Commutation Value for Pension shall be used for payment of commutation of pension based on
pre revised pay or pension and in respect of such pensioners, the revised Table of Commutation Value for Pension, appended to these rules shall be used for the commutation of additional amount of pension that has become commutable on account of retrospective revision of pay and pension.
Calculation of Commutation Factor of Pension with Eligibility – Illustration
Every pensioner is eligible to commute a portion of his monthly pension for a lumpsum payment which is the commuted value of that portion of pension. An employee or pensioner against whom departmental or judicial proceedings are pending is not eligible to commute a portion of his pension till completion of such proceedings.
Not exceeding 40% of monthly pension. Any fraction in the amount offered for commutation will be ignored. example, if the monthly pension is Rs. 24,500 then the maximum amount admissible for commutation is: Rs. 9,800 (24500 x 40/100) only.
Commutation Amount is calculated with respect of the Commutation factor taken from Commutation Table as relevant to the age next birthday.
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The formula for working out the lumpsum payable is as follows.
Amount of pension offered for Commutation x 12 x Commutation factor
Two illustrations are given below as per commutation of pension rules
Illustration 1: In case of an employee retired on July 2018 with the basic pension of Rs. 24,500
- Amount of pension offered for Commutation = Rs. 9,800
- Age next birthday = 61 years
- Commutation Factor = 8.194
- Lumpsum Payable = 9800 x 12 x 8.194 = Rs. 9,63,614 (rounded off)
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- Amount of pension offered for Commutation = Rs. 510
- Age next birthday = 61 years
- Commutation Factor = 9.81
- Lumpsum Payable = 510 x 12 x 9.81 = Rs. 60,037 (rounded off)
The reduction in the amount of pension on commutation will become operative from the date of receipt of the commuted value by the pensioner, or at the end of three months after the issue of authority for payment, whichever is earlier. The restoration of the commuted portion of pension will be admissible on completion of 15 years, for which the pensioner should apply to the pension disbursing authority.