Pension Updation: PSB Retirees

*Pension Updation: PSB Retirees*

_(Reproduced by Gireesh, DCS, AlBPARC, Trivandrum)_

Some of our friends are eager to know about  effect of updation on their pension, as and when it will happen. They are requesting me the methodology of updation and its impact on their pension. I have posted the conversion factor to bring out a fact that it is not at all difficult to calculate the  actual cost of updation by the banks.  One can get the actual cost of updation for each bank, by a simple programme with these factors  with in a few hours. Consolidation and the  cost impact  for the entire industry can be analysed with in a week by any actuary and hardly it will not take more than a month to come to a decision.

Hence the matter cannot be delayed citing the cost factor as the total  annual cost of updation by all banks  will be around 3% of pension funds, which can easily be met from the pension funds if RBI formula is implemented. .

The effect of updation of pension  will be that

1. 100% D.A. Neutralisation would be granted for the pensioners retired from 1-01-1986 to 31.10.2002.

2.  If pension is updated at 6352 points uniform DA rate will be applicable for all retirees at 0.07% per slab wef August 2019.

3.  As DA is merged with basic pay during every bipartite settlement , the basic pension  too has to be converted  by  merging applicable DR with a conversion factor.

4. GOI, Ministry of Finance vide ref 11/5/2001 dt 04.06.2019 has approved updation of pension for RBI pensioners with a formula for arriving at the conversion factor.

5.  Based on the above RBI formula ,the basic pension has to be notionally revised with respective wage revision , with a conversion factor as follows.

6. Conversion factor with10% load as done in RBI  for various periods of settlement is as follows.

a.  Retirees before 01-11-1992, Conversion factor 19.84

b. Retirees between 01-11-1992 to 31-03-1998, conversion factor 9.40

c. Retirees between 01-04-1998 to 31-10-2002,  conversion factor 5.82

d. Retirees between 01-11-2002 to 31-10-2007 conversion factor 3.90

e. Retirees between 01-11-2007 to 31-10-2012, conversion factor t 2.85

f. Retirees between 01-11-2012 to 31-10-2017, conversion factor 1.62

g. Retirees after 01-11-2017 - The revised pension will be  fixed will as  fixed with revised BP after merger of CPI 6352.

7.  How to calculate updated eligible pension: Select the period of retirement. Apply the conversion factor for the relevant period and multiply it with original pension. ( Before Computation).

For example

Conversion factor for those who retired between 01.11.2007 to 31.10.2012 is 2.85 as per RBI formula on pension updation.

Present Pension before commutation*2.85 = Revised pension .

Apply DR at 20.79% ( for Aug 20 to Jan 21) on revised pension.

Revised Pension-Com value+ DR on revised pension = Net Pension

Note: 1. This is only a rough calculation based on the available input and data and final figures depends upon the formula and conversion factor to be adapted. This post is to help the retiree to get some insight about the benefits of up dation of pension.

2.The present index as on Nov 20 is 7713 and there is a likely increase of more than 3% DR in the updated pension as per 11th bipartite.

*Vijayaraghavan R*

(Ex-lOB) - ARISE