Reducing periodicity for Restoration of Commutation of Pension, from 15 year’s to 12 year’s: Request to Secretary (Pension), DoP&T and Secretary Finance by Confederation dtd 15.06.2024 request-periodicity-commutation-pension-confederation CONFEDERATION OF CENTRAL GOVT. EMPLOYEES & WORKERS North Avenue New Delhi-11008 Ref: Confd. Commutation/2024 Dated – 15.06.2024 To 1) Secretary (Pension), Department of Pension & Pensioners’ Welfare, Lok Nayak Bhawan, Khan Market, New Delhi-110003. Email : secy-arpg[at]nic.in 2) The Secretary Department of Personnel & Training Ministry of Personnel, P G and Pensions Government of India North Block, New Delhi – 110 001 secy_mop[at]nic.in 3). Finance Secretary & Secretary (Expenditure) Ministry of Finance, Department of Expenditure, North Block New Delhi-110001.Email: secyexp[at]nic.in Sub : Request for Reducing periodicity for Restoration of Commutation of Pension, from 15 year’s to 12 year’s. – reg.. Respected sir, The Confederation of Central Government Employees and Worker’s, having more than 130 Central Government Employees/PSUs employees Associations/Federations as its affiliates, would like to draw your kind attention towards the following facts in support of the subject cited above ,for considerations and issuance of necessary order’s. That the mortality rate has been reducing year by year and life expectancy has been increasing year after year . The interest rates varies from year to year .From 1973 to 2008 the mortality rate has been reduced over 41% and further reducing year after year as per the reports of Institute of Actuaries of India. The mortality factor is published by the Institute of Actuaries of India in 1973 it was 0.02014 , in 2004 it was 0.013073 and in 2021 it was 0.006349 , which shows risk factor of less than 0.1% and life expectancy is 80 years as per Census department source: www.censusindia.gov.in/SRSpublications “SRS Based Abridged Life Tables” which contains the estimates of Life Expectancy at various ages based on five year moving average data. Expectation of life at age 60 years by sex, India, 2011-15 to 2013-17 Period Mid-year Total Male Female 2011-15 2013 18.0 17.1 18.9 2012-16 2014 18.1 17.3 18.9 2013-17 2015 18.1 17.4 18.9 This interest rate on commuted value of pension is recoverable in 2.66 years. The Commuted Factor on the Next birthday after superannuation is 61 years, and the commutation value is 8.194 . Thus, total recovery period of the commuted amount is = 8.194 + 2.66 = 10.85 years. Even after full recovery, the pensioner keeps on paying for 15 years and thus he goes on to pay additionally for more than 4 years. (15 years minus 10.85 = 4.15 years). Thus, excess recovery is taking place for 4.15 years. We cannot have a risk factor for 4 years as the recovery of the commuted value of Pension is recovered in 10.85 years. While providing the Commutation amount the risk factor is already taken into account as per the mortality table of Institute of Actuaries of India. Further the Central Pay Commissions have studied and recommended as follows: 1- Central Pay Commission (CPC): 5th CPC, headed by retired Justice S. Ratnavel Pandian of Supreme Court, whose recommendations were effective from 01.01.1996, had strongly recommended in Chapter 136 of its report reduction of the period of restoration of full pension to 12 years but it was summarily rejected by the Government without recording any plausible reason. The relevant observations of the 5th CPC are reproduced below: “136.10 As mentioned earlier, the commuted value of pension receivable currently by an employee retiring at the normal age of 58 years is equal to 10.46 years’ purchase. We have, however, separately recommended that the age of superannuation be raised from 58 to 60 years. Consequently, the commutation value in respect of employees superannuating at the age of 60 years and commuting a portion of pension within a period of one year would be equal to 9.81 years’ purchase. After adding thereto a further period of two years for recovery of interest in terms of the observations of the Supreme Court, it would be reasonable to restore the commuted portion of the pension after 12 years, instead of 15 years as at present. We recommend accordingly. In arriving at this decision, we have also taken note of the fact that several State Governments, such as Kerala, Madhya Pradesh, Orissa and Punjab, now permit restoration after a similar period of 12 years.” “136.12 … …Having regard to all relevant factors, we recommend that the commuted portion of pension shall be restored after a period of 12 years reckoned from the actual date of commutation.…”. 2- Kerala Govt: In the State of Kerala, 12 years has always been the norm. Kerala Service Rules Part III (Pension Rules)-Commutation Pension, Appendix X (Copy enclosed ) clearly says that “Restoration period of commutation is 12 years”. 3- SECOND NATIONAL JUDICIAL PAY COMMISSION (Part III) Commission was headed by retired Justice P. V. Reddy of Supreme Court appointed by Hon’ble Supreme Court of India in the year 2021 has examined in detail on the subject of commutation of pension from page 88 to 112 of its report (Copy enclosed ) Has recommend for reduction from 15 years to 12 years . Its important observations are as follows . a) From any angle, the Commission is of the prima facie view that the time of restoration of commuted value of pension is too long and a fresh look has to be taken in view of the long passage of time. It is axiomatic that the Government should not stand to gain or lose in the transaction which is basically in the nature of welfare measure. The period of restoration of commuted pension shall be such that the Government shall be able to recover the amount released in lumpsum with reasonable interest and the period of restoration determined shall not be such as to result in profit to the Government. The fact that the pensioner gets advantage in the form of lumpsum amount shall not be stretched too far. b) Restoration period of 12 years suggested by V CPC appears to be more than adequate. In fact as per the workings given by the Commission supra, it is seen that the lump sum paid in lieu of commutation stands recovered with interest rate of 8% p.a. within 11 years. Even after giving due allowance to unforeseen contingencies, prima facie, it is reasonable to conclude that the restoration ought to take place on the expiry of 12 years and not beyond that. c) The judgment of Hon’ble Supreme Court rendered in the year 1986 [(1987) 1 SCC 142] had fixed 15 years for restoration of commutation, today has lost its relevance as 38 years has lapsed, in the present day context and cannot be taken as a binding precedent for all time to come. Hence restoration of the commuted value of pension should be done at least after 12 years instead of 15 years at present. The policy of the Central Government towards its employees who have served the nation building for more than 30 years of service should sympathetic to its employees and they should look after the welfare of employees and particularly pensioners as a model employer , the concept of profit making for central government on these issue should not be the criteria for fixing the commutation factor and restoration of commuted value of pension. Hence ,the Confederation requests to kindly consider our requests in light of above submissions and arrange to cause an order for Reducing the PERIODICITY FOR RESTORATION OF COMMUTATION OF PENSION, FROM 15 YEARS to 12 YEARS . With regards, Yours Sincerely, Sd/- (S B Yadav) Secretary General Annexures enclosed 1. Kerala Govt order’s 2. Gujarat Govt order’s 3. National judicial commission report page 88 to 112 4. Report of Actuaries Institute of India

 Reducing periodicity for Restoration of Commutation of Pension, from 15 year’s to 12 year’s: Request to Secretary (Pension), DoP&T and Secretary Finance by Confederation dtd 15.06.2024

CONFEDERATION OF CENTRAL GOVT. EMPLOYEES & WORKERS
North Avenue New Delhi-11008

Ref: Confd. Commutation/2024

Dated – 15.06.2024

To

1) Secretary (Pension),
Department of Pension & Pensioners’ Welfare, Lok Nayak Bhawan, Khan Market, New Delhi-110003. Email : secy-arpg[at]nic.in

2) The Secretary
Department of Personnel & Training Ministry of Personnel, P G and Pensions Government of India North Block, New Delhi – 110 001 secy_mop[at]nic.in

3). Finance Secretary & Secretary (Expenditure) Ministry of Finance, Department of Expenditure,
North Block New Delhi-110001.Email: secyexp[at]nic.in

Sub : Request for Reducing periodicity for Restoration of Commutation of Pension, from 15 year’s to 12 year’s. – reg..

Respected sir,

The Confederation of Central Government Employees and Worker’s, having more than 130 Central Government Employees/PSUs employees Associations/Federations as its affiliates, would like to draw your kind attention towards the following facts in support of the subject cited above ,for considerations and issuance of necessary order’s.

That the mortality rate has been reducing year by year and life expectancy has been increasing year after year . The interest rates varies from year to year .From 1973 to 2008 the mortality rate has been reduced over 41% and further reducing year after year as per the reports of Institute of Actuaries of India.

The mortality factor is published by the Institute of Actuaries of India in 1973 it was 0.02014 , in 2004 it was 0.013073 and in 2021 it was 0.006349 , which shows risk factor of less than 0.1% and life expectancy is 80 years as per Census department source: www.censusindia.gov.in/SRSpublications

“SRS  Based  Abridged   Life  Tables”   which   contains  the  estimates   of  Life Expectancy at various ages based on five year moving average data.

Expectation of life at age 60 years by sex, India, 2011-15 to 2013-17
Period	Mid-year	Total	Male	Female
2011-15	2013	18.0	17.1	18.9
2012-16	2014	18.1	17.3	18.9
2013-17	2015	18.1	17.4	18.9

This interest rate on commuted value of pension is recoverable in 2.66 years. The Commuted Factor on the Next birthday after superannuation is 61 years, and the commutation value is 8.194 . Thus, total recovery period of the commuted amount is = 8.194 + 2.66 = 10.85 years. Even after full recovery, the pensioner keeps on paying for 15 years and thus he goes on to pay additionally for more than 4 years. (15 years minus 10.85 = 4.15 years). Thus, excess recovery is taking place for 4.15 years. We cannot have a risk factor for 4 years as the recovery of the commuted value of Pension is recovered in 10.85 years. While providing the Commutation amount the risk factor is already taken into account as per the mortality table of Institute of Actuaries of India.

Further the Central Pay Commissions have studied and recommended as follows:

1- Central Pay Commission (CPC): 5th CPC, headed by retired Justice S. Ratnavel Pandian of Supreme Court, whose recommendations were effective from 01.01.1996, had strongly recommended in Chapter 136 of its report reduction of the period of restoration of full pension to 12 years but it was summarily rejected by the Government without recording any plausible reason. The relevant observations of the 5th CPC are reproduced below:

“136.10 As  mentioned  earlier,  the  commuted  value  of  pension  receivable currently by an employee retiring at the normal age of 58 years is equal to 10.46 years’ purchase. We have, however, separately recommended that the age of superannuation be raised from 58 to 60 years. Consequently, the commutation value in respect of employees superannuating at the age of 60 years and commuting a portion of pension within a period of one year would be equal to 9.81 years’ purchase. After adding thereto a further period of two years for recovery of interest in terms of the observations of the Supreme Court, it would be reasonable to restore the commuted portion of the pension after 12 years, instead of 15 years as at present. We recommend accordingly. In arriving at this decision, we have also taken note of the fact that several State Governments, such as Kerala, Madhya Pradesh, Orissa and Punjab, now permit restoration after a similar period of 12 years.” “136.12 … …Having regard to all relevant factors, we recommend that the commuted portion of pension shall be restored after a period of 12 years reckoned from the actual date of commutation.…”.

2- Kerala Govt: In the State of Kerala, 12 years has always been the norm. Kerala Service Rules Part III (Pension Rules)-Commutation Pension, Appendix X (Copy enclosed ) clearly says that “Restoration period of commutation is 12 years”.

3- SECOND NATIONAL JUDICIAL PAY COMMISSION (Part III) Commission was headed by retired Justice P. V. Reddy of Supreme Court appointed by Hon’ble Supreme Court of India in the year 2021 has examined in detail on the subject of commutation of pension from page 88 to 112 of its report (Copy enclosed ) Has recommend for reduction from 15 years to 12 years . Its important observations are as follows .

a) From any angle, the Commission is of the prima facie view that the time of restoration of commuted value of pension is too long and a fresh look has to be taken in view of the long passage of time. It is axiomatic that the Government should not stand to gain or lose in the transaction which is basically in the nature of welfare measure. The period of restoration of commuted pension shall be such that the Government shall be able to recover the amount released in lumpsum with reasonable interest and the period of restoration determined shall not be such as to result in profit to the Government. The fact that the pensioner gets advantage in the form of lumpsum amount shall not be stretched too far.

b) Restoration period of 12 years suggested by V CPC appears to be more than adequate. In fact as per the workings given by the Commission supra, it is seen that the lump sum paid in lieu of commutation stands recovered with interest rate of 8% p.a. within 11 years. Even after giving due allowance to unforeseen contingencies, prima facie, it is reasonable to conclude that the restoration ought to take place on the expiry of 12 years and not beyond that.

c) The judgment of Hon’ble Supreme Court rendered in the year 1986 [(1987) 1 SCC 142] had fixed 15 years for restoration of commutation, today has lost its relevance as 38 years has lapsed, in the present day context and cannot be taken as a binding precedent for all time to come. Hence restoration of the commuted value of pension should be done at least after 12 years instead of 15 years at present.

The policy of the Central Government towards its employees who have served the nation building for more than 30 years of service should sympathetic to its employees and they should look after the welfare of employees and particularly pensioners as a model employer , the concept of profit making for central government on these issue should not be the criteria for fixing the commutation factor and restoration of commuted value of pension. Hence ,the Confederation requests to kindly consider our requests in light of above submissions and arrange to cause an order for Reducing the PERIODICITY FOR RESTORATION OF COMMUTATION OF PENSION, FROM 15 YEARS to 12 YEARS .

With regards,

Yours Sincerely,

Sd/-
(S B Yadav)
Secretary General

Annexures enclosed
1. Kerala Govt order’s
2. Gujarat Govt order’s
3. National judicial commission report page 88 to 112
4. Report of Actuaries Institute of India