Pension in India

Pension Scheme in IndiaEvents in Pension SchemeAll about Pension
  PensionScheme in India

The Pension system in India was introduced by the British Government after the Indian Independence struggle in 1857. This was a reflection of the Pension system then prevailing in Britain. The pay scales in the government service in India were planned to enable the “native employees” of the British Government to meet their normal subsistence. Practically nothing was left from the pay to make provision for their post-retirement life. The service conditions did not allow the Government employees to earn any extra income by doing business or through any other profession. Pension system for providing some definite income to employees after their retirement was thought off. Aim of this provision had been to discourage employees from mal practices. The Government decided to provide money cover for their post retirement life. The Pension System thus started in India was finalized by the Indian Pension Act of 1871. However, Viceroy and Governors were given the final authority for granting pension. This had been kept outside the jurisdiction of all courts. Thus Court decisions were not binding on the Government.

British Government occasionally compensated pensioners through increase in their pension to neutralize effect of inflation. Temporary increase in pension was granted first during 1921 to compensate the rise in prices after the First World War. Similarly increase was given in 1943, 1944 & 1945 after Second World War. There had been no rule or formula for increase in pension.

Thereafter in spite of rise in prices (inflations) pensioners were not compensated for a long time. Serving employees were given some dearness allowance from time to time. Also part of that was treated as pay for calculation of pension. No real benefit was given to pensioners after 1945.

The first pay commission was appointed in 1946. The P & T Pensioners Association tried its best to bring the problems of pensioners into the orbit of the pay commission. However, they did not succeed. The commission clarified that the pensioners' problems could not be examined as the same were not ‘referred to’ the Commission.

Even though the retirement benefits were being given by the Government from time to time, they were not incorporated in Fundamental Rules made effective from 1-1-1922. It was later decided by the Government to make revised pension rules governing the cases of post-1938 entrants. These rules were actually enforced only in 1945. These rules gave rise to many problems. Later, Liberalised pension rules were formed in 1950 with effective date of 17-04-1950. These rules included benefits like DCRG and commutation of pension. Family pension scheme came into existence with effect from 01-01-1964. In 1968 on a writ filed, Supreme Court ruled that Pension is binding obligation of government (and not a gift / reward or bounty). (Writ No. 217 / 1968). During 1972 commission presided over by Justice Gajendragadkar reviewed pension law and recommended that the the pension law being against the rules of constitution must be scraped. However, the Government did not take any action on commission's report. Only action taken by the Government during 1972 had been Government brought out a consolidated publication of all scattered pension rules under the title “New Pension Rules 1972”. Thus it took 50 years after issuing fundamental rules for pension during 1922 to consolidate pension rules.

During 1981 Shri N. V. (Kakasaheb) Gadgil (then ruling party MP) presented a private resolution for 'Pension' There had been discussions in Parliament for 2 days. The resolution was supported by most of the members including then MP Shri Atal Behari Bajapai (Later PM of India thrice). Shri Gadgil withdrew this resolution on assurance given by then Minister of State Shri Venkat Subaiyya.

In 1985 CGH Scheme was made applicable to pensioners including their dependants.

A non statutory committee called standing committee of voluntary Association (SCOVA) was constituted in 1986 in the Ministry of Pension and Pensioners’ Welfare to discuss problems of pensioners and make recommendations to the Government. Many pensioners’ organisations were nominated to the committee by the Ministry and Quarterly meetings were held under the chairmanship of the Minister.

The period of 7 years for grant of Family Pension in the case of absconded pensioners was brought down to one year in 1977.

Widows of retirees covered by CPF scheme were granted ex-gratia with effect from 1986.

Shri D. S. Nakara Financial Advisor to Ministry of Defense, (an officer from Indian Defense Service Audit and Accounts) retired in 1972. He faced many problems in getting pension. Finally he lodged a petition in the Supreme Court. Justice Yashavantrao Chandrachud, then Chief Justice heard the petitioner and the Government and ruled that 'Pension is neither a gift nor a reward or bounty' Pension is the right of a retired Government servant who had served nation for a long time. Government is bound to ensure that her employees lead a peaceful and honorable life after retirement. This historical judgment was issued on 17 Dec 1982. 

Since then every year 17 December is celebrated by pensioners all over India as "Pensioners' Day"
Chronological Events in Pension Scheme
  1. 1.      India Pension Act introduced in 1871.
  2. 2.      First increase in pension made in (1914-18) when First war was over.
  3. 3.      Second temporary increase was sanctioned in 1943-1945 (2nd World War is over) due to high inflation.
  4. 4.      Due to increase in high rate’s etc. some portion of pay (D.P.) was ordered to add while fixing pension w.e.f. 1.1.46 (Retired between 2.3.39 to 31.12.47). This was effected w.e.f. 23.3.1947. This concession was extended up to 31.12.52.
  5. 5.      F.R made effective from 1.1.1922. But pension rules were not consolidated up to 1.10.38. Liberalized Pension Rules 1950 were formed and made effective from 17-4-1950. Pension rules 1972 were framed on the basis of Liberalized Pension Rules 1950.
  6. 6.      As per Supreme Court decision dated 17-12-82 in Writ petition NO. 5939/80 that pension is binding / obligation on Government it is not a gift / reward/bounty. (Nakra Judgment)
  7. 7.      Liberalised Pension Rules 1950 had provided DCRG/family pension for restricted period. ½ rd commutation of pension amount was allowed and provision of nomination.
  8. 8.      Supply of calculation sheet to pensioners started by order dated. 26-12-1970.
  9. 9.      D.A. Committee granted following temporary increase w.e.f. 1-4-1958.
  10. 10.  Ex-Pakistan Pension cases since 1948 to 1965.
  11. 11.  Late P.M. Shri Lal Bahadur Shastri granted relief w.e.f. 1-10-1963.
  12. 12.  Family pension scheme introduced w.e.f. 1-1-1964 (reducing 2 months DCRG) Reduction of 2 months D.C.R.G w.e.f. 22-9-1977. Spouses alive on 22-9-1977 were granted Family Pension w.e.f. 22-9-1977 in pursuance of the Supreme Court decision. If record is not available Affidavit was accepted as proof due to efforts of Shri B. S. Vaze.
  13. 13.  Recommendation of Committee (Loksabha) submitted dated. 19-12-1968 to the Government.
  14. 14.  Minimum Pension Rs. 100/- fixed w.e.f. 1-1-1973, Rs. 375/- W.e.f. 1-1-1986 and Rs. 1,275/- w.e.f. 1-1-1996. (Equal to minimum living standard).
  15. 15.  Provision of Medical Aid introduced through CGHS in 1985.
  16. 16.   Formation of SCOVA in 1986.
  17. 17.  Formation of CAT in 1985 for Central Government Pensioners to get their grievances solved through it.
  18. 18.  Restoration of full pension is expected after 15 years of retirement. This is because pension commutation is for the period of 15 years. However in many cases disbursing authorities did not take appropriate action and wanted specific orders from pension fixing authority. Association files writ petition in Supreme Court and decision obtained in favour of pensioners. Government of India has issued appropriate orders based on NAKARA case.
  19. 19.  Physically and mentally handicapped children and widowed daughter of pensioners are now eligible for family pension. Government accepted this and the decision is in force since 1974. Further family pension is now admissible for unmarried and divorced daughters. There is no age limit for daughters but income limit is applicable.
  20. 20.  Association took up a case for granting of family pension to the spouse where pensioner absconds for 1 year. Earlier this limit had been 7 years. This decision is implemented since 1997. (54.10.12).
  21. 21.  Now parents of deceased pensioner are eligible for family pension provided the parents have no other children and their income is less than Rs. 2250.This is based on recommendation in memorandum submitted by the Association to Fifth CPC. CPC accepted this and included in their recommendation [54(20)] to the Government of India.  The Government accepted this and is in effect since 1-1-96.
  22. 22.   Grant of ex-gratia payment to widows of CPF Retirees in 1986 (Rs. 150 + D/r and Rs. 605 + DR w.e.f. a.a. 1996).
  23. 23.  Pensioners retired prior to 1986 were given relief by re-fixing pension and payment of pension was revised w.e.f. 1-1-1986. Dearness Relief also has been made applicable to this category of pensioners. (Fifth CPC).
  24. 24.  This is not an achievement of the association. Noted here for information only. All State Governments have accepted and implemented recommendations of Fourth and Fifth CPC for their employees and pensioners.
  25. 25.  Fixed Medical Allowance now admissible to Pensioners who are not residing in Medical Scheme like  CGHS etc. w.e.f. 1-12-1997 vide orders dated 27-12-1997.
  26. 26.  Dearness Relief allowed to Family Pensioners / Pension (2nd & 3rd) w.e.f. 18-7-1997 dated. 25-6-1997 (Gazette dated. 19-7-1997- 55A.)
  27. 27.  50% Dearness Relief merged with basic Pension w.e.f. 1-4-2004, named as Dearness Pension.
  28. 28.  Military Pensioners up to JCOs rank granted revised pension w.e.f. 1-1-2006. Tables published by CDA (P) Alahabad.


All about Pension (Taken from Pensioners Portal)

Which rules Govern Pension?Who is the Pension Sanctioning Authority?
What should a Government servant do to claim his pension?Who is to authorise the pension?
What to do in case the pension has not been fixed correctly?Whether retirement gratuity, death gratuity can be paid by PAO/CPAO? etc.
Is the Dearness Relief payable on original basic pension or on reduced pension after commutation?
Is any authorization from PAO/CPAO required for payment of dearness relief on increased rates to pensioners/family pensioners?
Is there any restriction on commutation of pension?Is there any limit on commutation of pension?
What will be the effective date of reduced pension if, 
(a) The applicant is drawing pension from PAO?
(b) The applicant is drawing pension from a branch of Public Sector Bank?
(c) A Government servant who retired on superannuation and commutation applied in form 1-A of CCS (Commutation of Pension) Rules up to the date of retirement and commutation paid through Head of Office

How does the period of 15 years for restoration of commuted portion of pension reckon?
Whether the family can be given the benefit of 40 per cent commutation if, a pensioner dies before exercising option?
Is any authorization for restoration of commuted portion of pension after 15 years required from PAO/CPAO?
Whether retirement gratuity/death gratuity, commuted value of pension is taxable ?Is the payment of Pension in Cash or through a Joint Account without EITHER or SURVIVOR facility permitted in the Scheme for Payment of Pension to Central Government Civil Pensioners by the Public Sector Banks?
Can a pension account be operated by a holder of Power of Attorney?
Can the deduction of Income Tax at source be made from pension payments?Can the excess payment, if any, credited to the pensioner’s account be recovered by the bank?
Can the payment of retirement/death gratuity be made by the bank?What to do if a pensioner/family pensioner desires to get his pension payment account transfer
(a) From one paying branch to another of the same Public Sector Bank within the same station or a different station?
(b) From one Public Sector Bank to another Public Sector Bank within the same station. Such transfers to be allowed only once in a financial year ?
(c)From one Public Sector Bank to another Public Sector Bank at a different station?
What is the procedure for switchover of pension payment from Pay; Accounts Office to Public Sector Bank ?
Who is to authorise payment of family pension and death gratuity when a Govt. servant dies while on deputation?
What should a family member eligible for the grant of family pension do to get the family pension?
Up-to which period family pension is payable?Is family pension payable to more than one person at a time?
How is the family pension payable to twin children?Is family pension payable to a spouse judicially separated?
What has the pensioner to do for restoration of commuted portion of pension? What date is it restored?
To whom is rounding off benefit of percentage of disability pension admissible?
Under Vth CPC orders remarriage of widow even with a person other than real brother of the deceased does not debar her from payment of special family pension. What is the exact rule position in this regard?
Whether family pension may be sanctioned to a handicapped child during lifetime of a pensioner who has no wife or any other children.?
Continuance award of Special Family Pension is admissible from which date and in whose favour is the SFP Continued?
Whether in all cases service element is payable along with disability element in disability pension cases?
Whether restoration of commuted portion of pension is admissible to those who were absorbed permanently in autonomous bodies/PSUs and have drawn lump-sum capitalised value in lieu of pension?
Describe Consolidation of family pension at the rate of 30% of pay in respect of pre-96 family pension cases and method of calculation thereof?
Is the family pension admissible to parents?
Is the period of payment of enhanced family pension for 7 Years or up to 67 Years?What is the formula for pension revision for pre-86 pensioner/family pensioner?
What is the formula for pension revision for pre-86 retirees?What is the minimum pension?
How much of the pension can be commuted?Is there any ceiling on gratuities and if so what is the maximum amount admissible?
What is the extent of neutralization of relief granted to pensioners?Is personal pension to be discontinued with effect from 1.1.1996?
What is the medical allowance for pensioners?Is a re-employed pensioner eligible for DR?
When can pension be withheld or withdrawn?What is restoration of pension and when is it due?
What should I do for the restoration of pension?What is enhanced family pension and how long is it paid?
Are the employed family pensioners and the re-employed pensioners entitled to Dearness Relief (DR) on their family pension/pension?
When is Death-cum-Retirement Gratuity withheld?
What is reduced pension?
When can a Government servant apply for voluntary retirement?To whom should I apply for revision of pension?
When will my DCRG/part of DCRG be released?Can parents get family pension?
What is the meaning of the following terms?
(a) Pension Disbursing Authority (b) Pension Sanctioning Authority (c) PPO Issuing Authority
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