Big Relief Likely For Pensioners, Government May Reduce Commuted Pension Period To 12 Years Under 8th Pay Commission

New Delhi: Retired government employees and current staff are hopeful that the 8th Pay Commission will recommend significant changes to the pension commutation rules. One of the key proposals is to reduce the commuted pension restoration period from 15 years to 12 years—a long-standing demand by employee unions. The 8th Pay Commission is expected to submit its recommendations next year.

What is Commuted Pension?

At the time of retirement, government employees have the option to take a lump sum payment by commuting a portion of their pension. In return, their monthly pension is reduced proportionately for a fixed number of years—currently 15 years. After this period, full pension is restored.

Why Pensioners Want Restoration After 12 Years

Employee unions argue that the 15-year restoration period is too long and financially unfair. Due to falling interest rates, the government's recovery calculations have become skewed, leading to a substantial loss for pensioners. Reducing the restoration period to 12 years would help retirees regain their full pension earlier—offering much-needed financial support, especially in the face of rising living and medical costs.

Demand Raised by Staff Side of NC JCM

The National Council (JCM) – Staff Side, a key body representing central government employees, has formally submitted this demand to the Cabinet Secretary. The demand to shorten the commutation period is among several important issues raised and is expected to be included in the 8th Pay Commission’s Terms of Reference (ToR).

Discussed in SCOVA Meeting

The issue was also discussed in the 34th SCOVA (Standing Committee on Voluntary Agencies) meeting held on March 11, 2025, chaired by the Minister of State for Personnel, Public Grievances and Pensions. Officials from the Finance Ministry’s Department of Expenditure acknowledged the need to make the current system more equitable and practical. As a result, this issue is likely to be part of the 8th Pay Commission’s mandate.

Current Status of the 8th Pay Commission

The 7th Pay Commission’s tenure ends on December 31, 2025. Normally, a new pay commission is implemented every 10 years, so the 8th Pay Commission is expected to be effective from January 1, 2026. However, the government has yet to announce its members or finalize its ToR, leading to concerns about potential delays.

What Will Be the Benefits?

If the 12-year restoration period is approved:

Retirees will regain their full pension sooner

Financial independence post-retirement will improve

Easier management of medical and family expenses

If applied retrospectively, even existing pensioners could benefit

A Long-Standing Demand May Finally Be Fulfilled

Considering the inclusion of this issue in the upcoming pay commission’s ToR is a positive signal. Even though the 8th Pay Commission hasn’t formally begun its work, pensioners and employees now have a realistic hope for relief. This will not just be a financial correction but also a gesture of respect toward those who have dedicated their lives to public service.