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hi to all i want to know what are the benefits of commutation of pension why people go for it? regards monika:icon1:
From India, Mumbai
Hi Monika,
Commutation of pension is selling out a part of pension at a rate on which the annuity is determined. You get lumpsum in lieu of commutation which is fully tax free. How much of your pension you can commute depends on the Rule of the Pension Fund but in most cases one third of pension is allowable for commutation. For example if your pension is Rs 3000/- u can commute one third which is Rs 1000/- for which u will get lumpsum and your monthly pension will be Rs. 2000/-. Organisations who are buying annuities from Life Insurance Corporation of India for payment of pension to their employees in their case the part of pension which is allowable for commutation cannot be reinstated . But for Govt employees one third pension which they commute at the time of retirement gets reinstated after 15 years ( perhaps it has been amended to 10 years).
Therefore from the above hope u understand the benefits of commutation and why people go for it.

From India, Calcutta
you mean they can use this pension amount before retirement is it so or i am taking it other way round
From India, Panipat
Hi Monika,
Pension is payable only on retirement or on resignation if the benefit accrues to the employee at the time of resignation. It is a superannuation benefit so is commutation.How can can u expect pension before retirement.

From India, Calcutta
so we can demand for pension after resignation is it so please sum body clear my confusion
From India, Panipat
Hi Sarita,
In all cases one can't demand for pension scheme after resignation. If one has done 10 years of service (al least) & has passed 58 years of age then one can enjoy the benefits of pension scheme. However, one can also enjoy it after passing the age of 50 but in such condition the pension amount will be reduced by 3% per annum ((may be it is now 4% per annum ,plz check))
Hope it will clear ur doubt

From India, Calcutta
Dear Sarita

Let me clear every thing to you.

1. One gets pension if one is a member for a pension fund. That means if your employer / organisation has a pension scheme (self or outsourced). many organisations do not have one and only beneifts are gratuity and PF.

2. The pension is regulated by the pension rules. generally minimum service for pension is 10 years. Further, if you do 33 years of service you get full pension as per the formula which will be based on you Pay. If you have 20 years plus service then some organisation give benefit of 5 years notional service. Thus if you have put 20 yrs service your pension will be calculated by adding 5 yrs in your service.

3. Pl note that whatever pension is fixed for you, (generally basic for this purpose) on your retirement, one third you can commute. This means if your basic is fixed at 9000/- you can commute one third i.e. 3000/- p.m. for say 15 years(15 yrs does not mean you will get exact 15 years but it is based on some factors depending on your age) . Let us say your facor is 13 than your commutation amount will be 3000X12(months)X13 (factor in your case)=Rs. 468000/-

4. Generally 2nd commutation is allowed after 15 yrs.

5. Pl remember your reduced basic every month after commutation will be 6000 and you will get DA on original basic of 9000/-

Hope now u undrstd.

Pension is after retirement, commutation is pre-empting some part your basic pension. This are social security measures.


Prabhaker Verma

From India, Mumbai
Dear Prabhakar thnx for sharing it. Would u plz tell me the formula of pension for the above citation & where that commutation formula has been?
From India, Calcutta
dear all,
I am navy retired/pensioner.Today,first time i received my pension slip.there is commutation installment of rs 675 per month.deduction will be up to dec 2018.
I am not aware about this deduction.with out my knowledge who state bank of India can do this.
if any body wants to share this topic pl revert me

From India, Nashik
My mother is taking pension after my father's death while in service. It's already started, we did not know about commutation of pension earlier. Is it possible to avail this commutation of pension now?

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