Pension Commutation

Retiring benefits of employees

consist of two elements.
Pension
Commutation/Gratuity

Pension is paid monthly while

commutation is one time lump sum
payment at the time of retirement.

What is Commutation

Commutationof Pension means

payment of lump sum amount in lieu
of a portion of pension
surrenderedvoluntarily by the
pensioner based on a duration of
period in relation to the age
After attaining the age of 73 / 75, the
commuted portion is restored and
added in the current Pension amount.
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Basis of Pension and Commutation Calculation

Pension Calculation Formula

Gross Pension = 70 % of Pensionable Emoluments x No. of Qualifying
Service years* /30
*(No. Of Qualifying Service taken 10 to 30 years maximum)

e.g. If Pensionable Emoluments = Rs 9240 ,Service Period=23yrs then

Gross Pension
=70% x 9240 x 23 / 30
= 4959

Commutation Calculation Formula

Commutation = Commutation Rate x Gross Pension x Rate as per Age
Next Birthday x 12

Commutation Rate as Per Scale Adopted

SCALES
01-07-2008

01-122001

01-07-1986

BEFORE
1986

COMMUTATIO
N

35 %

40 %

50 %

25 %
Gratuity
(Compulsory
)

NET PENSION

65 %

60 %

50 %

25 %
Commutatio
n (Optional)

NOTE : Restoration of Commuted portion of Pension had been

discontinued with effect from 01-12-2001

Calculation of Net Pension & Commutation (1986 Scale)

In the given example Pensioner adopted 1986 Scales and Gross Pension is 4959
and Age next to Birthday is 58 years

Therefore :
Net Pension

=
=
Commutation =
=

50% of Gross Pension

50% x 4959 = 2479.5
50% of Gross Pension
50% x 4959 = 2479.5

Commutation Rate (1986 Scale)

Commutation Calculation Formula

Commutation = Commutation Rate x Gross Pension x Rate as
per Age Next Birthday x 12

= 50% x 4959 x 16.7925 x 12

= Rs 499644/-

Calculation of Net Pension & Commutation (2001 Scale)

In the given example Pensioner adopted 2001 Scales and Gross Pension is 4959
and Age next to Birthday is 58 years

Therefore :
Net Pension

=
=
Commutation =
=

60% of Gross Pension

60% x 4959 = 2975.4
40% of Gross Pension
40% x 4959 = 1983.6

Commutation Rate Table (2001 Scale)

Commutation Calculation Formula

Commutation = Commutation Rate x Gross Pension x Rate as

per Age Next Birthday x 12

= 40% x 4959 x 13.434 x 12

= Rs 319,772/-

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Present Practice

After attaining the age of 75 years, the

pensioners retired before December 2, 2001 are
entitled to receive the commuted portion of the
pension along with their existing Pension e.g. If
Pension at the time of retirement was Rs.65 and
commuted portion was Rs.35 then at the age of
75, if Pension becomes with annual pension
increases Rs.200, the commuted portion of Rs.35
becomes part of Pension which means now
Pensioner will be getting Rs.235 per month.

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Commutation Issue

A Government Pensioner filed writ petition in Lahore High Court to apply

Pension
increases on commuted portion and add it to existing pension.

Petition decided in Pensioners favor despite the ICA filed by Deputy

accountant
General and appeal from Federation of Pakistan.

PTET pensioners also filed petition in Lahore high court.

LHC decided PTET Pensioners appeal in the light of already decided case and
mentioned
that this petition is allowed strictly in terms of the aforesaid reported
judgment.

PTET filed Intra Court Appeal in Lahore High court and the matter is subjudice
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Commutation Restoration Impact

Total Pensioners11,718
=

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Double Pension Calculation

Example

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Thanks

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