Pension Revision for Bank VRS Optees after Addion of 5 yrs Qualifying Service

I am a vrs optee Manager (IT) from a nationalized bank. Regarding calculation of arrears of pension , I have been told by my vrs optee friends from my bank and other banks that they are not aware of the procedure of calculation of revised pension. I have also learnt from my friends from other banks they have received arrears from bank without any calculation particulars and in some cases it is less than what they have approximately calculated. For the benefit of the vrs optees I have given below the procedure for the fixation of basic pension , revised commutation amount and calculation of arrears. I have devised my procedure from different guidelines given in pension rule book. Since I had developed govt pension payment software package for our bank, when I was working with the bank, I am aware of the procedures and guidelines for pension fixation. All my vrs optee friends are requested to go through the following procedure for fixation and calculation of arrears of pension. Any suggestions / comments are welcome. I have also given example of calculation of pension arrears. Fixation of revised basic pension correctly , is very important task. If basic pension is fixed less than what we are eligible, we will be at permanent loss. Please insist banks for giving details of calculation.


Pension revision for vrs optees after addition of 5 years of service

Calculation methods and logic used for arriving at revised pension

1.Qualifying service - According to pension rules qualifying service of an employee shall commence from the date he is appointed in any cadre of the bank , on permanent basis. Period of probation shall be treated as qualifying service. If the Broken period of the service is the service of is less than 12 months , the broken period six months and less than six months shall be ignored and six months and one day shall be reckoned as one year.

Example Date of Joining : 5th July 1978

Date of Retirement: 31st Mar 2001

Total service : 22 years 8 months

Qualifying service : 23 years

In any case qualifying service will not exceed 33 years.

2.Pension basic calculation formula as per pension rules

(Average emoluments) X ( No. of years of qualifying service (max 33 yrs))

------------------------ ------------------------------------------------------- = Basic

(2) X ( 33)

From above formula we can derive formula for calculation of average emoluments if figures of basic pension and qualifying service are available.

33 X 2 X Basic
------------------------ = Average emoluments

Qualifying service

3. On the basic of average emoluments derived by above formula we can calculate the revised
basic on the basis of revised qualifying service (.i.e. by adding notional qualifying service of
5 years to original qualifying service )

Example - From the PPO following figures are available

Basic at the time of retirement : 3820

Qualifying service : 20 years

( 33 X 2 X 3820)

----------------------------------- =Average emoluments = 12606

( 20 )

Now we can calculate revised basic by adding 5 years to qualifying service

(12606 X 25)

------------------------------ = Revised basic = 4775

(2 X 33)
4. Basic pension is revised from 01/05/2005 by merging D.A. Same method is used for computing average emoluments and revising basic after addition of 5 years notional qualifying service .

5. Commutation amount from original basic pension and commutation value is available in P.P.O . It can be calculated using formula and commutation value table for Re.1 given in pension rules book. Maximum pension one can commute is 1/3 of basic pension. Age on next birthday after retirement is taken into account for calculation purpose.

Commutation Amount = 12 X value for Re.1 commuted amount as per table X commuted pension amount

Table for value per Re.1 commuted amount is available on the site

6 .D A is calculated on original basic ( i.e. basic without commuted amount)

Total pension is calculated as follows

Total Pension payable = Original basic + D.A. on original basic – commuted amt

D. A is calculated from D.A percent which changes at the interval of 6 months

depending upon average C.P.I and slabs as circulated by I B A.