Whether difference of Commutation after revision of Pension is beneficial ?

*Whether difference of Commutation after revision of Pension is beneficial ?*

After the 11th BPS, the members retired after 01/11/2017 are in a confusion with regards to option of incremental commutation, which is offered in the BPS. There will be an immediate reduction in the take home pension which is worrying most of the members. But opting for incremental commutation is still preferable due to the following reasons:

1. Your take home pension is reduced but not your total pension. Take home is reduced because the commutation portion has increased.

2. Your incremental commutation amount will fetch you returns somewhat equivalent to the reduction in pension.

3. Since your basic pension is increased and the DA on total pension is payable to you, future DA increas will mitigate the reduction in pension in a short while.

4. The lump sum you receive as commutation is tax free and it also reduces the taxable pension amount.

5. After 15 years, the commuted amount will be restored in your pension.

6. Incase of any eventuality in between, your family will have the Commutation amount with them while receiving the full eligible family pension. Hence Commutation has got an insurance effect, which should be factored.

7. Since the amount is payable in advance, which was otherwise payable in monthly installments for 15 years, if you take the inflation in to consideration, the amount repayable is far less than amount received in the real money value.

8. While the Commutation portion incase of bank retirees are only 33.33%, it is 40% incase of central government employees and 50% incase of defence personnel. Every group is demanding for commutation of more portion.

In view of the above, it is  preferable that incremental commutation is beneficial in most of the cases. Any Retiree having any specific personal reasons for not opting the same may do so after considering all the above facts.

(Courtesy - NSN Reddy)