What commutation of pension means
At retirement a central government servant may "commute" — sell back — up to 40% of the pension for a one-time lump sum. The Pensioners' Portal of the Department of Pension & Pensioners' Welfare explains the three rules that matter: the lump sum is calculated from the Commutation Table, the monthly pension stands reduced by the portion commuted, and "the commuted portion will be restored on the expiry of 15 years". Dearness Relief, however, "will continue to be calculated on the basis of the original pension (i.e. without reduction of commuted portion)".
Commuted value of pension (CVP) = commuted monthly pension × commutation factor × 12. The factor depends on the age next birthday on the date commutation becomes absolute — 8.194 at age next birthday 61, which is the usual case for retirement at 60.
Who this calculator is for
- Central civil pensioners who commuted part of their pension and want to know when the deduction stops.
- Pensioners checking whether the bank is deducting the right amount and paying DR on the full pension.
- Anyone estimating what the 8th Pay Commission would mean while a commutation deduction is still running.
- Employees close to retirement deciding how much to commute (the decision needs the exact factor and your own circumstances; this tool shows the arithmetic).
How to use it
- Enter your full basic pension — the figure before the deduction.
- Enter the commuted part as a percentage, or better, as the exact rupee amount printed on your PPO.
- Choose the month the deduction started. The 15 years run from the date the reduction became operative (from retirement itself if the lump sum was paid in the first month).
- Keep 8.194 as the factor unless your sanction letter shows another one. Enter your age and a fitment factor, then calculate.
Worked examples
| Basic pension | Commuted | Monthly deduction | Lump sum at 8.194 | Credit now (60% DR) | Credit after restoration |
|---|---|---|---|---|---|
| ₹20,000 | 40% | ₹8,000 | ₹7,86,624 | ₹24,000 | ₹32,000 |
| ₹30,000 | 40% | ₹12,000 | ₹11,79,936 | ₹36,000 | ₹48,000 |
| ₹45,000 | 40% | ₹18,000 | ₹17,69,904 | ₹54,000 | ₹72,000 |
| ₹30,000 | 20% | ₹6,000 | ₹5,89,968 | ₹42,000 | ₹48,000 |
For ₹30,000 basic with 40% commuted, the deduction is ₹12,000 a month and the lump sum about ₹11,79,936. Over 15 years ₹21,60,000 is deducted in total. In exchange the pensioner received the lump sum up front, and the 15-year restoration rule means the deduction ends even though it has already recovered the lump sum in about 8.2 years at this factor (8.194 × 12 = about 98 months), ignoring interest.
Commutation and the 8th Pay Commission
When the 7th CPC revised pre-2016 pensions, the revised (consolidated) pension included the commuted portion and "the commuted portion will be deducted from the said amount while making monthly disbursements" (DoPPW OM dated 04.08.2016, para 4.3). In practice the full basic pension was multiplied by 2.57 and the deduction stayed at the same rupee amount. If the 8th CPC follows the same approach, a pensioner still under deduction gains more than the plain factor suggests on the net credit. Example: ₹30,000 basic, ₹12,000 deduction, factor 2.57 — new basic ₹77,100, credit ₹65,100 until restoration against ₹36,000 today. This is an estimate, not an order.
Under the 6th and 7th CPC, employees who retired on or after the date of effect and got arrears of pension could commute the additional pension using the revised table; the Pensioners' Portal FAQ says the age at the original commutation is used but the factor from the revised table applies. A similar provision may come with the 8th CPC; nothing has been announced.
Restoration: what you need to do
Nothing, usually. The Pensioners' Portal FAQ says restoration after 15 years "is to be made automatically by bank"; where the date of commutation is not in the PPO, the bank obtains it from the Pay and Accounts Office through CPAO. Check your first credit after the restoration month. If it has not gone up, write to your pension paying branch with your PPO number, and if needed file a grievance on CPENGRAMS (pgportal.gov.in).
Common mistakes
- Counting 15 years from retirement when the lump sum came later. The period runs from the date the reduction became operative.
- Calculating DR on the reduced pension. DR is on the original pension.
- Using today's age for the factor. The factor is fixed by your age next birthday when commutation became absolute.
- Thinking you can commute more later. The FAQ says there is no second option after the first becomes absolute.