Government likely to introduce new pension plan worth Rs 5 crore; millions of central employees to be benefitted

Pension Plan


The Union cabinet is likely to approve a new Rs 5,000-crore pension formula next week. It is expected to benefit more than five million central government employees.

pension plans in india

According to a report in Hindustan Times, under the new formula pension will be calculated based on the latest drawn salary for a particular post.

The report quotes a senior official as saying that if a person retired as a director under the sixth pay commission, ten years later his pension would be fixed (based on) the salary of a director in the seventh pay commission.

He also asserted that the new pension scheme will be put up to cabinet for approval next week. The new method was fixed by an empowered committee of secretaries (Ecos) headed by secretary (pensions).

What does 7th Pay Commission suggests?

As per the recommendation of the seventh pay commission, pension could be calculated by two methods:

  • One, pension would be 50 per cent of the last salary and multiplied by 2.57.
  • Second, through an incremental method where pension was fixed at the last salary drawn with adjustments of increments drawn in that particular pay band.

However, it was found that the incremental method may have lacunae as 20 per cent of records were found to be missing in various government departments. The report says that this made the officials believed that such a thing could lead to litigation in future. Hence, the fixation method was discovered which would help in the avoidance of the hurdles.