Sunday, September 5, 2010

KNOW ABOUT PENSION AND GRATUITY

Background for Pension Facilities in Banking Industry in India :

 The present guidelines indicate that employees who have joined in the service of the bank on or after 29-09-1995 are automatically covered under the Pension Scheme.   However, employees who were in the serving in the banks up to 28.09.1995 have to opt for Pension.  This option was allowed as one time exercise in 1995, and employees who opted for Pension were  not eligible for the bank contribution to PF.

A)    Various Types of Pension
The following  types of Pension are normally available to employees in banks,  under Employees Pension Regulations, 1995:-



1.       Superannuation Pension.:
Granted on attaining the age of superannuation.   Minimum 10 years qualifying service required. Maximum service reckoned is 33 years (for this purpose fraction of service in excess of 6 months will be reckoned as one year).
2.    Pension on Voluntary Retirement.
Minimum 20 years qualifying service is required.   The qualifying service of an employee retiring voluntarily shall be increased by a period not exceeding five years subject to the condition that the retiree has got remaining service of 5 years and the total qualifying service shall not in any case exceed 33 years.

The employee may give notice of not less than three months in writing to the appointing authority; seeking voluntary retirement.   The notice of voluntary retirement shall require acceptance by the appointing authority.
3.     Invalid Pension.
This is applicable to employees who retire from service on account of bodily or mental infirmity, which permanently incapacitates him from the service.   Minimum 10 years qualifying service is required to apply for invalid Pension. He has to submit a medical certificate of incapacitation from a Medical Officer approved by the bank.
                 4.       Compassionate Allowance.
An employee who is dismissed or removed or terminated from service shall forfeit pension. In such cases the  authority higher than the authority competent to dismiss or remove or terminate him may, if the case is deserving of special consideration, sanction of a compassionate allowance not exceeding two third of the Pension which  would have been admissible to him on the basis of the qualifying service rendered up to the date of dismissal.

5        Premature Retirement Pension.

Premature retirement pension may be granted to employees who have rendered minimum 10 years of service and  retires from service on account of orders of the bank to retire prematurely in the public interest or for any otherreason specified in service regulations or settlement; if otherwise he was entitled to such pension on superannuationon that date.

6     Compulsory Retirement Pension.
An employee compulsorily retired from service as a penalty in terms of service regulations or settlement by the authority higher than the authority competent to impose such penalty may be granted Pension at a rate not less than 2/3 and not more than full Pension admissible to him on the date of his compulsory retirement, if otherwise he was entitled to such pension on superannuation on that date.


B)    Rate of Pension :

Minimum Pension Rs 1435/-   per month, who retire on or after 01.05.2005.

C)    Maximum Pension

Those who have got 33 years of qualifying service will get 50% of their average emoluments as Basic Pension and where the qualifying service is less than 33 years; the basic pension would be proportionate to their service.

D)    Calculation of Basic Pension.

Average of 10 months pay prior to the date of retirement has to be calculated (pay includes BP + increment component of FPP+PQP).
Basic pension = (10 months’ Average Pay    x    No of years of service) / (2x33) 

E)    Dearness Relief on Basic Pension.

In respect of employees who retire on or after 1.5.2005, Dearness Relief shall be payable for every rise   or   be recoverable for every fall, as the case may be of every 4 points over 2288 points in the quarterly average of the All India Average Consumer Price Index for Industrial Workers in the series 1960 = 100, at the rate 0.18% of Basic Pension.  
.
F)    Family Pension :

In the event of death while in service or after retirement, family pension shall be payable to spouse/dependents at the following rates w.e.f. 01.5.2005.

Scale of pay per month                        Amount of Family Pension
Upto Rs 5720                                        30% of the pay as family pension
                                                               with minimum of Rs 1435/-

Rs 5720 to 11440                                 20% of the pay as family pension
                                                              with minimum of Rs 1715

Above Rs 11440                                   15% of the pay as family pension
                                                               with minimum of Rs 2292 and
              Maximum of Rs 4784


(III)       FAMILY PENSION:

            In respect of employees (other than part-time employees) who retire /retired from service on or after 01.11.07 the ordinary rate of pension shall be as under:

Scale of pay per month
Amount of monthly family pension
Upto Rs.7,090/-
30 per cent of the ‘pay’ shall be the basic family pension plus 30 percent of allowances which are counted for making contributions to Provident Fund but not for dearness allowance shall be the additional family pension.  The aggregate of basic and additional family pension shall not be less than Rs.1,779 per month.
Rs.7,091 to Rs.14,180
20 per cent of the ‘pay’ shall be the basic family pension plus 20 per cent of allowances which are counted for making contributions to Provident Fund but not for dearness allowance shall be the additional family pension. The aggregate of basic and additional family pension shall not be less than Rs. 2,186 per month.
Above Rs. 14,181
15 per cent of the ‘pay’ shall be the basic family pension plus 15 per cent of allowances which are counted for making contributions to Provident Fund but not for the dearness allowance shall be the additional family pension.  The aggregate of basic and additional family pension shall not be less than Rs.2,841 per month and more than Rs. 5,930 per month

Note:   In the case of part-time employees, the minimum amount of family pension and the maximum amount of family pension shall be in proportion to the rate of scale wages drawn by the employee.

(IV)      MINIMUM PENSION:

            In respect of employees other than part-time employees, who retired on or after 01.11.07, the amount of minimum pension shall be Rs. 1,779 p.m.

In respect of part-time employees who retired on or after 1.11.07, the minimum pension payable shall be:

            Rs. 595 p.m. in respect of part time employees drawing 1/3 scale wages,
            Rs. 892 p.m. in respect of part time employees drawing 1/2 scale wages and
            Rs. 1,339 p.m in respect of part time employees drawing 3/4 scale wages.







Dearness Relief is applicable to Family Pension at the same rate applicable to Pension.

There is no stipulation for minimum service for Family Pension.   In the case of an employee who dies after 7 years of service, higher family pension equal to 50% of pay last drawn by the deceased employee or twice the ordinary rate of  family pension whichever is less, is payable till the date of deceased employee would have attained the age of 65 years subject to a maximum period of 7 years. 
Also in the event of death after retirement, before attaining the age of 65 years, higher family Pension as above shall be given.   Pay for this purpose has to be computed as given in clause D above.


G     Commutation of Pension

One third of Basic Pension may be commuted.
Commuted Value = 1/3rd Basic Pension x 12 x factor corresponding to age next birthday as on  date of application for commutation as given in the table below.

After commutation, monthly Pension will be 2/3rd of Pension but D.A. is payable on full Pension. At the end of 15 years after commutation, full pension shall be restored. Commutation amount is exempted from Income Tax.


Age next Birthday
Commutation value expressed
Age next birthday
Commutation value expressed
birthday
as number of years’ purchase
as number of years’ purchase.
as number of years’ purchase
30
17.78
53
12.35
31
17.62
54
12.05
32
17.46
55
11.73
33
17.29
56
11.42
34
17.11
57
11.10
35
16.92
58
10.78
16.72
59
10.46
37
16.52
60
10.13
38
16.31
61
9.81
39
16.09
62
9.48
40
15.87
63
9.15
41
15.64
64
8.82
42
15.40
65
8.50
43
15.15
66
8.17
44
14.90
67
7.85
45
14.64
68
7.53
46
14.37
69
7.22
47
14.10
70
6.91
48
13.82
71
6.60
49
13.54
72
6.30
50
13.25
73
6.01
51
12.95
74
5.72
52
12.66
75
5.44

H.    Gratuity

Gratuity is payable on death, retirement, permanent disablement or resignation of an employee and it is calculated by two methods as given below and the amount whichever is higher will be paid.   Gratuity amount up to 10.00 lacs is exempted from Income Tax. 

I.     Gratuity Act 1972:

An employee is eligible for gratuity after completion of 5 years of service.   The Gratuity payable under the act is 15 days wages for every completed years of service.   The maximum gratuity payable under the Act is Rs.10.00 lacs from 24.05.2010.

 Wages for this purpose will mean Basic Pay +Spl.Pay+ PQP + FPP (less HRA component) + Dearness Allowance).

The Calculation is as follows:
Gratuity Amount = (Wages) x No of year of service x 15/26

j.        Gratuity as per Service Regulations

An employee is eligible for gratuity after completion of 10 years service.   The gratuity payable is 15 months pay up to 30 years of service plus additional 15 days pay for every completed years of service beyond 30 years (Pay for this purpose means BP + PQP + Increment component of FPP).

8 comments:

Anonymous said...

NO NEWS FROM ANY BANK EMPLOYEE OFFICERS UNION SO THIS CLARIFICATION...
With the recent Pay commission report of increase in Gratuity amount from Rs 10 Lakhs to 20 Lakhs ( & would become 25L when DA increases by 50%) what steps are needed by Bankers' union/IBA to ensure Bank Employees derive the benefit?
Will this imply that Bank employees will automatically get the benefit? Will it require discussions only in next Bipartite? I am given to understand that it can commence immediately ….BUT THE MILLION DOLLAR QUESTION IS WHY BANK UNIONS ARE SILENT AND WHO WILL HAVE TO BELL THE CAT ?

A RAMASAMY said...

Gratuity act is automatic
To all incl.bsnks

TAPAS KUAMR Sen said...

It is historically applicable to all who are covered under Gratuity Act. For Bank employees and officers, enhancement of gratuity from 10l to 20l is applicable subject to calculation as per Bipartite of Gratuity Act whichever is higher. So need to raise question. Only we are awaiting Gezette of India notification in this regard for effective date.

T K Sen
PBGB, Howrah, WB

Prakhar Panjiar said...

Whether an employee who have retired in may 2016 are eligible to get 20 lacs gratuity?

Anonymous said...

sir whether the ceiling of Rs.10.00lakh gratuity ceiling is applicable for all cadres /scales in Bank?

Unknown said...


Can anybody enlighten me whether an employee of bank who have retired in the month of JANUARY 2016 is eligible to get RS.20 lacs as gratuity.

Parimal Das

Anonymous said...

What is the commutation factor for a person having birth date as 1st of the month and retiring on the last day of the previous month?

Anonymous said...

@tapas kumar sen
sir Gezette of India notification via 7th pay commission already accepted by GOI & gratuity is part of 7th pay recommendation.
whether is it required for further notification for gratuity