Draft Memorandum of Central Government Pensioners’ Association, Kerala, forwarded to the Secretary General, NCCPA for submission to The Chairman, Seventh Central Pay Commission
This Memorandum is submitted on behalf of all the Central Government Pensioners of this country, numbering around 4 million, by this Association representing all the Central Government Pensioners present and future. This Memorandum is submitted with a view to enabling the Pay commission to examine the principles which should govern the structure of pension and other retirement benefits, including revision of pension.
1. Withdraw the PFRDA Act and restore Statutory Benefit Pension Scheme:
a) It is our considered view that New Pension Scheme (National Pension System) introduced through a Government of India Notification dated 22-12-2003 was made applicable to new entrants in Government of India service from 01-01-2004. We have a genuine apprehension that the existing provisions in the PFRDA Act bestow powers on the Government to extend the application to other pension schemes including the pension schemes exempted in the Act.
b) The New Pension Scheme is introduced on the specious argument that continuance of the Defined-Benefit Scheme is a drain on the exchequer which was countered by the Expert Body namely Centre for Economic Studies and Policy, Institute of Social and Economic Change, Bengaluru engaged by the sixth CPC. It was of the opinion that the outgo of the pension liability is indicating an apparent declining trend as compared to the GDP and hence introduction of an alternative scheme will make the position complicated.
c) As per the Scheme, Government will have to contribute 10% of the monthly emoluments (pay plus DA) of the employees causing an additional burden on the exchequer up to the second half of 2030s.
d) As per section 20(g) of the Act, “there shall not be any implicit or explicit assurance of benefits except market-based guarantee mechanism to be purchased by the subscribers”. As such this New Pension Scheme is against the interest of even those who are covered by this scheme.
e) While all the employees, whether recruited before 01-01-2004 or after, are governed by the same set of service conditions, there is absolutely no justification for discriminating the homogeneous class on the basis of date of recruitment. This is apparently against the basic tenets of the Constitution and the mandatory conclusion of the
in Nakara case.
Taking all these aspects into due consideration, the VII CPC may recommend total scrapping of the New Pension Scheme; and the existing and obsolete Pension Act 1871 may be replaced by a New Pension Act incorporating the Defined-Benefit Pension Scheme to all.
2. Date of effect, Minimum Pension, Rate of Pension and of Family Pension:
a) Date of effect of implementation of 7th CPC: The recommendations of the CPC are at present being implemented in a period of 10 years. But wage revision for employees / workers of various central public sector undertaking is done in 5 years duration. As such it is requested that the recommendations of the VII CPC be made applicable to the employees as well as pensioners with effect from 01-01-2014, at least after a period of 8 years.
b) Minimum basic pension: The minimum basic pension fixed by VI CPC was Rs.3500/- which was 50% of the minimum pay in the pay band (Rs.5200/-) plus Grade Pay thereon (Rs.1800/-). The consultants for V CPC, Tata Economic Consultancy Services, taking all micro aspects into scientific consideration, had suggested that 67% of last pay drawn should be allowed as minimum pension. Considering the passage of time since then, the quantum of increase in the GDP of the nation and quantum of increase in the per capita income it is reasonable to demand 75% of the last pay plus Grade Pay drawn as minimum pension. This should not be less than Rs. 12250/- with effect from 01-012014. The calculation details are furnished below:
01-01-2014 (Pre-revised) - 3500
Dearness Relief (100%) - 3500
Increase suggested (75%) - 5250
c) Rate of pension: The rate of pension fixed by VI CPC was 50% of the pay last drawn. The Hon’ble Supreme Court of India had in the landmark judgement of D.S.Nakara and others Vs. Union of India (AIR 1983, SC 130) clarified that a pension scheme must provide that the pensioner would be able to live at a standard equivalent at the pre retirement level. To render even a partial compliance to the observation it is necessary that the rate of pension be 75% of the pay last drawn or the average of 10 months emoluments last drawn, whichever is higher, subject to a minimum of Rs.12250/-
d) Family pension: At present 30% of last pay drawn is allowed as family pension. It is reasonable and justifiable to suggest 45% of last pay drawn as family pension.
e) We suggest that the pension amount may be computed rounding to the next multiple of Rs. 10/-
f) In certain States, (Eg: Kerala and Maharasthra) pension for a month is credited to the account of the pensioner on the first day of that month. Even the Supreme Court of India has upheld this practice. So we suggest that pension of Central Government Pensioners be credited to their accounts on the first day of the Calendar month instead of the present practice of crediting on the last two working days of the month.
3. Full parity to past pensioners:
Pay band and grade pay system introduced by VI CPC caused heavy disparities between pre and post 2006 retirees. The concept of modified parity introduced by the 5th CPC as a measure to reduce the financial implication must be replaced with the full parity concept as was made applicable for the personnel retired prior to 1.1.1986. In other words, the pay of every retired person must be re-determined notionally as if he is not retired and then his pension to be computed under the revised rules. This alone will protect the value of pension of a retired person.
4. Restoration of commuted portion of pension:
According to the present scheme a consolidated amount reckoned at the commutation value of 8.194 is disbursed to the pensioner at the time of retirement whereas recovery is effected for 15 years i.e, for approximately double the commutation value. As per a Note prepared by Ministry of Personnel, Public Grievances and Pensions, Department of Pension & Pensioners’ Welfare (File F.No.42/8180/2011-P&PW (G)) the rate of interest at which commuted value of pension is fully recovered is 20.7% per annum in the case of employees who retired at the age of 60 yrs after 01-01-2006. This is in fact an enrichment of the exchequer at the expense of the poor pensioner which cannot be justified by any stretch of reasonable argument, particularly in a state where socialism has been declared as the goal. Hence restoration of the commuted portion should be done after 10 years instead of the present 15 years. In the case of pre-2006 retirees the excess recovered may be refunded to the pensioners.
5. Grant of additional pension:
Senior citizens, during their advanced age, have to bear additional financial burden due to age related diseases and social and family obligations. So additional pension at the rate of 10% may be granted from 65 years and at the rate of 20% for 95 years and 100 years of age. Accordingly we suggest the following increase in the basic pension:
Age (in yrs) Increase in pension
6. Merger of Dearness Relief and grant of Interim Relief:
a) It was the well considered suggestion of V CPC that whenever DR exceeded 50%, it should be merged with basic pension. Now the DR has exceeded 50% from 01-01-2011 and 100% from 01-01-2014. We demand 50% DR be merged with basic pension retrospectively from 01-01-2011 and the consequential Dearness Relief arrears may be disbursed to the pensioners.
b) We suggest that Pay Commission may recommend 20% of basic pension as Interim Relief to all the existing pensioners
7. DA/DR formula:
At present DA/DR is given to the employees / pensioners half yearly taking into account the average consumer price index for 12 months. It is claimed that full neutralization of the cost of living is effected in granting the DA/DR. The claim dose not stand the scrutiny of the contemporary economic stratification. For example, on 01-01-2006, i.e, at the time of implementation of VIth Pay Commission the DA/DR was nil. Now on 01-01-2014 after giving full neutralization the DA/DR has arrived at 100%. The conclusion is that the cost of index based on the present methodology of calculation has only doubled. But the reality is that the cost of essential commodities has spiraled manifold. Hence a rational methodology for computing DA/DR is to be evolved, and the periodicity changed to quarterly from the present half yearly.
8. Evolution of a comprehensive health scheme to the pensioners:
The existing Health Schemes such as CGHS, ECHS, RELHS etc are to be strengthened by providing all facilities, wherever necessary and extended to all the District Head Quarters of the Country. The pensioner who is not covered by the schemes should be provided with the facility of claiming medical expenses for indoor treatment under CS (MA) Rules, 1944 as recommended by the V CPC. District level nodal offices under each department may be recommended for reimbursement purpose. The existing Fixed Medical Allowance in lieu of outpatient treatment is to be enhanced to Rs. 2500/- per mensem, and should be linked to increase in Consumer Price Index.
9. Pension may be exempted from income tax:
At present senior citizens are exempted from income tax up to Rs. 2.5 lakh. This is too inadequate an amount we suggest that senior citizens may be exempted from income tax for an amount upto Rs. 6 lakh.
10. Grant of festival allowance:
Almost all State Governments grant festival allowance to their pensioners. Actually senior citizens are generally enthusiastic in celebrating important festivals of their region/religion. We request VII CPC to recommend one month’s pension in a year as festival allowance to pensioners.
11. Travel concession:
Travel concession to pensioners: At present LTC is being granted to working employees. The pensioners’ organizations have been consistently and persistently demanding travel concessions to pensioners under a rational and reasonable scheme. It is requested that a scheme be evolved under which a pensioner along with family members is eligible for reimbursement of the cost of journey with in the country once in 2 years reckoned at actual entitlement while the pensioner was in service.
12. Restructuring of SCOVA, the redressal forum of grievances of pensioners:
The existing scheme of SCOVA serves no effective purpose in the pursuit of grievances of the pensioners. The V CPC had strongly recommended the re-constitution of the SCOVA so that it functions as a genuine grievance redressal forum. So it is to be restructured in such a way that the genuine grievances of the pensioners are meaningfully discussed and conclusions arrived at. With a view to making it an effective mechanism it should be made a statutory body.