Ahead of the finalisation of the Terms of Reference (ToR) for the 8th Pay Commission, the issue of pension commutation is back in focu. It is an old demand of employee unions that the period for restoration of the commuted part of the pension should be reduced from 15 years to 12 years. The question is whether the 8th Pay Commission will make any recommendation in this direction, and the government will accept it this time.
What is pension commutation?
At the time of retirement, central employees can choose to take a maximum of 40% of their pension in lump sum. This is called ‘pension commutation’. In return, their monthly pension is reduced by that percentage. But, under the current rules, this reduced pension is restored again after 15 years.
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The 5th Pay Commission allowed employees to commute their pension from one-third to 40%. Also, the panel recommended that the commuted pension should be restored in 12 years. But the government did not accept this suggestion and continued the period of 15 years.
The subsequent 6th and 7th Pay Commissions did not find it necessary to suggest any change in this rule.
What has been the stand of the courts on the pension commutation period matter?
In 1986, the Supreme Court in the “Common Cause vs Union of India” case said that even though the government recovers the commuted amount in 12 years, the period of restoration was fixed at 15 years, keeping in mind the ‘risk factor’ (the possibility that the employee may die before full recovery).
In 2019, the Delhi High Court also justified the period of 15 years based on the same logic. The Supreme Court also upheld this decision.
The courts believe that this is a completely policy decision and the judiciary cannot interfere in it.
Current demands and expectations from the 8th Pay Commission
The representative bodies of central employees, especially NC-JCM (National Council of Joint Consultative Machinery), have been demanding for a long time that the period of 15 years be reduced to 12 years.
The argument being given is that now the average life expectancy has increased a lot.
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