Commutation of Pension of Railway Employees

Commutation of Pension of Railway Employees – Method to calculate Commutation Value

1.         What is the process for Commutation of Pension?

A Railway Servant who is due to retire and desires payment of commuted value of pension being authorized at the time of issue of PPO itself, may apply for commutation of pension along with pension papers prior to the date of retirement. Commutation will, however, not be allowed if the employee dies before retirement. Now Commutation Form is also annexed with Pension Forms.

2.         What are the facts regarding admissibility of Commutation of Pension?

Some facts are:

(i) Commutation of only ordinary Pension (viz. Compensation, Invalid, Superannuation and Retiring Pension) is admissible.

(ii) Compassionate Grant/Allowances granted to a person who is removed or dismissed shall also be treated as Pension for the purpose of commutation.

(iii) The maximum amount of pension granted may be commuted to the extent of 40% at the discretion of the employee.

(iv) The lump sum payable on commutation shall be calculated in accordance with the Table prescribed for the purpose from time to time.

(v) An employee shall not be subjected to medical examination, if he applies for commutation within one year of his retirement or superannuation.

(vi) A Railway Servant against whom a judicial or departmental proceeding has been instituted shall not be permitted to commute any portion during the pendency of such proceedings. He will be eligible for Pension on conclusion of such enquiry and thus be entitled for commutation without medical examination and the period of one year for applying for commutation in this case will be from the date of orders issued on the conclusion of proceedings.

(vii) If the pensioner dies on or after the day on which commutation become absolute (commutation becomes absolute on the date following the retirement) but before receiving the commutation value, this value shall be paid to his heirs.

(viii) The Commutation of Pension shall be valid for 10 years. If, however, the pensioner is alive for more than 15 years, the commuted portion of pension of pensioner will be restored after 15 years.

(ix) Pursuant to the judgement of Supreme Court delivered on 09.12.1986, Pensioners who have commuted their pension are entitled to have the commuted portion restored irrespective of their date of retirement, provided they have completed or will complete 15 years of retirement on or after 01.04.1985 i.e. the date from which restoration has been allowed. In case where period of 15 years has already been over before 01.04.1985, the restoration will be permissible from 01.04.1985 only.

3.         What is the Commutation Value for Pension?

Presently the Commutation Value for a Pension of Rs.1 per annum is done as per Commutation Table given below:

IIustration for calculating Railway Pension Commutation

In case of an employee serving in Pay Band-2 ScaleRs.9300-34800 in Grade Pay Rs.4200 who was drawing Last Pay Rs.20000/- retires on superannuation after completing 33 years of qualifying service. 40% commutation of Pension opted.

Check links below for more details on each of Retirement Benefit applicable to Railway Employees

[catlist tags=”railway-employees-retirement-benefits” numberposts=10 orderby=date order=desc]

Source: Indian Railways