The Central government looks all set to introduce a new pension scheme that will benefit around 50 lakh of its employees. The scheme should bring quite some cheer to them because it calculates the pension on the existing salary of a Central government employee.
Coming after the 2 percent hike in Dearness Allowance for employees as well as pensioners, the scheme is expected to receive the green signal from the Central Cabinet sometime next week when it comes up for discussion. The scheme is believed to have an outlay of Rs 5,000 crore.
A senior government official explained it to a news outlet thus: "If a person retired as a director under the sixth pay commission, 10 years later his pension would be fixed (based on) the salary of a director in the seventh pay commission. "The new pension scheme will be put up to the Cabinet for approval next week."
New formula used
The new scheme — devised by an empowered committee of secretaries — is believed to be an improvement on the two manners in which the seventh Central Pay Commission (7th CPC) had recommended pension calculation.
The first of these formulae was simple: Pension would be fixed at 2.57 times half of the last salary drawn. Mathematically expressed, if S is the last salary drawn and P is the pension, the formula is: P = (S x 2.57) / 2, or even simplified: P = S x 1.285.
The second formula took into consideration the salary as well as the perks and increments of the pay band at which the Central government employee retired. However, there were problems with this formula because personnel files of one out of every five retired Central government employee was missing.
The aforementioned senior government official pointed out that government employees whose records were missing could take the legal route if the second formula was taken. "To avoid legal hurdles, the Ecos came up with the pay fixation method," he said.
