Pension Revision for Bank VRS Optees After completion of 5 years of 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.


Arrears Calculation Example

Name							Pension starting Date	1-Apr-2001
PPO No
Birth Date					31-Oct-1955
Join Date					3-Jul-1981
Ret Date					31-Mar-2001
					Prerevised		Revised (after 5 years weightage)
Qualifying Service					20		Qualifying Service	25
Basic					3820		Basic	4775
Average Emoluments					12606
Basic from 01/05/2005					4419		Basic from 01/05/2005	5524
Average Emoluments					14583
Commutation					1273		Commutation	1592
Age at next b'day after retirement					46			46
Commute value per Re.1					14.37		Commute value per Re.1	14.37
Commutation Amount					219516.12		Commutation Amount	274467.00
Total Pension					549978.83		Total Pension	678359.92
							Pension Difference	128381.09
							Commutation Difference	54950.88
							Total Difference	183331.97

Pension calculation based on prerevised basic and commutation
From	To	Basic	D..A	Commutation	Net Pension	Months	Total
1-Apr-01	31-Jul-01	3820	1387.35	1273	3934.35	4	15737.41
1-Aug-01	31-Jan-02	3820	1434.22	1273	3981.22	6	23887.33
1-Feb-02	31-Jul-02	3820	1631.08	1273	4178.08	6	25068.46
1-Aug-02	31-Jan-03	3820	1668.57	1273	4215.57	6	25293.43
1-Feb-03	31-Jul-03	3820	1827.93	1273	4374.93	6	26249.58
1-Aug-03	31-Jan-04	3820	1921.67	1273	4468.67	6	26812.02
1-Feb-04	31-Jul-04	3820	2015.41	1273	4562.41	6	27374.46
1-Aug-04	31-Jan-05	3820	2081.03	1273	4628.03	6	27768.17
1-Feb-05	30-Apr-05	3820	2259.13	1273	4806.13	3	14418.40
1-May-05	31-Jul-05	4419	2318.31	1273	5464.31	3	16392.92
1-Aug-05	31-Jan-06	4419	2359.34	1273	5505.34	6	33032.04
1-Feb-06	31-Jul-06	4419	2636.31	1273	5782.31	6	34693.84
1-Aug-06	31-Jan-07	4419	2779.92	1273	5925.92	6	35555.51
1-Feb-07	31-Jul-07	4419	3108.17	1273	6254.17	6	37525.04
1-Aug-07	31-Jan-08	4419	3231.27	1273	6377.27	6	38263.62
1-Feb-08	31-Jul-08	4419	3518.49	1273	6664.49	6	39986.96
1-Aug-08	31-Jan-09	4419	3815.98	1273	6961.98	6	41771.86
1-Feb-09	31-Jul-09	4419	4318.62	1273	7464.62	6	44787.71
1-Aug-09	30-Sep-09	4419	4534.04	1273	7680.04	2	15360.07
	Total	78570	48846.83	24187	103229.83	102	549978.83

Pension calculation based on revised basic and commutation
From	To	Basic	D..A	Commutation	Net Pension	Months	Total
1-Apr-01	31-Jul-01	4775	1684.17	1592	4867.50	4	19470.00
1-Aug-01	31-Jan-02	4775	1741.06	1592	4924.40	6	29546.38
1-Feb-02	31-Jul-02	4775	1980.03	1592	5163.37	6	30980.20
1-Aug-02	31-Jan-03	4775	2025.55	1592	5208.88	6	31253.31
1-Feb-03	31-Jul-03	4775	2219.00	1592	5402.34	6	32414.02
1-Aug-03	31-Jan-04	4775	2332.80	1592	5516.13	6	33096.79
1-Feb-04	31-Jul-04	4775	2446.59	1592	5629.93	6	33779.56
1-Aug-04	31-Jan-05	4775	2526.25	1592	5709.58	6	34257.49
1-Feb-05	30-Apr-05	4775	2742.46	1592	5925.79	3	17777.38
1-May-05	31-Jul-05	5524	2817.66	1592	6749.74	3	20249.22
1-Aug-05	31-Jan-06	5524	2867.53	1592	6799.61	6	40797.65
1-Feb-06	31-Jul-06	5524	3204.15	1592	7136.23	6	42817.39
1-Aug-06	31-Jan-07	5524	3378.69	1592	7310.78	6	43864.66
1-Feb-07	31-Jul-07	5524	3777.65	1592	7709.74	6	46258.42
1-Aug-07	31-Jan-08	5524	3927.26	1592	7859.35	6	47156.08
1-Feb-08	31-Jul-08	5524	4276.35	1592	8208.44	6	49250.62
1-Aug-08	31-Jan-09	5524	4637.91	1592	8569.99	6	51419.96
1-Feb-09	31-Jul-09	5524	5248.82	1592	9180.90	6	55085.41
1-Aug-09	30-Sep-09	5524	5510.64	1592	9442.72	2	18885.44
	Total	98213	59344.56	30242	127315.40	102	678359.92