7th Pay Commission: Cabinet Clears Changes In Pension Benefits

7th Pay Commission: Cabinet Clears Changes In Pension Benefits

The benefit of the changes in 7th Pay Commission will be available from January 1, 2016.

Highlights

  • Cabinet approved modifications in 7th Pay Commission recommendations
  • The benefits will be available with effect from January 1, 2016
  • The decision included arrears to be given for 2 months of 2015-16
The Union Cabinet meet chaired by the Prime Minister Narendra Modi on Wednesday approved the important proposals relating to modifications in the 7th Pay Commission recommendations on pay and pension benefits in the course of their implementation. In June last year, the Cabinet had approved implementation of the recommendations with an additional financial outgo of Rs 84,933 crore for 2016-17 (including arrears for 2 months of 2015-16).

The benefit of the proposed modifications will be available with effect from January 1, 2016. With the increase approved by the Cabinet, the annual pension bill alone of the Central Government is likely to be Rs 1,76,071 crore.  

Two top decisions of the Cabinet are stated below:

1. Revision Of Pension Of Pre-2016 Pensioners And Family Pensioners

The Cabinet approved modifications in the recommendations of the 7th Pay Commission relating to the method of revision of pension of pre-2016 pensioners and family pensioners based on suggestions made by the Committee chaired by Secretary (Pensions) constituted with the approval of the Cabinet. The modified formulation of pension revision approved by the Cabinet will entail an additional benefit to the pensioners and an additional expenditure of approximately Rs 5,031 crore for 2016-17 over and above the expenditure already incurred in revision of pension as per the second formulation based on fitment factor.  It will benefit over 55 lakh pre-2016 civil and defence pensioners and family pensioners.

Earlier, the Cabinet had approved the changed method of pension revision recommended by the 7th Pay Commission for pre-2016 pensioners, comprising of two alternative formulations, subject to the feasibility of the first formulation which was to be examined by the Committee.

In terms of the Cabinet decision, pensions of pre-2016 pensioners were revised as per the second formulation multiplying existing pension by a fitment factor of 2.57, though the pensioners were to be given the option of choosing the more beneficial of the two formulations as per the 7th Pay Commission recommendations.

In order to provide the more beneficial option to the pensioners, Cabinet has accepted the recommendations of the Committee, which has suggested revision of pension based on information contained in the Pension Payment Order (PPO) issued to every pensioner. The revised procedure of fixation of notional pay is more scientific, rational and implementable in all the cases. The modified formulation will be beneficial to more pensioners than the first formulation recommended by the 7th Pay Commission, which was not found to be feasible to implement. 

2. Disability Pension For Defence Pensioners

The Cabinet also approved the retention of percentage-based regime of disability pension implemented post 6th Pay Commission, which the 7th Pay Commission had recommended to be replaced by a slab-based system.
           
The issue of disability pension was referred to the National Anomaly Committee by the Ministry of Defence on account of the representation received from the Defence Forces to retain the slab-based system, as it would have resulted in reduction in the amount of disability pension for existing pensioners and a reduction in the amount of disability pension for future retirees when compared to percentage-based disability pension. 

The decision which will benefit existing and future Defence pensioners would entail an additional expenditure of approximately Rs 130 crore per annum.