New Pension Scheme with Rs.5000 Crore Package

New Delhi, April 22: The Union cabinet is set to approve a new pension method with a package of Rs 5,000 crores, which will be benefited by the above 50 lakhs of people, applicable for only central government employees.

The Official sources said that the new formula will calculate pension based on the latest drawn salary for a particular post.

"If a person retired as a director, under the sixth pay commission, ten years later his pension would be fixed (based on) the salary of a director in the seventh pay commission," explained a senior government official.

The new pension scheme will be put up to the cabinet for approval next week.

The new method was fixed by an empowered committee of secretaries (Ecos) headed by the secretary (pensions).

The seventh pay commission recommended that pension could be calculated by two methods: One, the pension would be 50% of the last salary and multiplied by 2.57. The second was an incremental method where pension was fixed at the last salary drawn with adjustments of increments drawn in that particular pay band.

The incremental method was found to have lacunae as 20% of records were found to be missing in various government departments, and officials felt this could lead to litigation in future.

"To avoid legal hurdles, the Ecos came up with the pay fixation method", explained the senior official.