How do you calculate the commuted value of a pension?

How do you calculate the commuted value of a pension?

The commuted value is then divided by the life expectancy of the employee to calculate the annual pension benefit payable to the employee. If you’re a mathematician, here’s the typical formula to calculate commuted value: PV = FV/ (1 + k)^n.

How are commutation factors calculated?

max PCLS / (scheme pension – reduced pension) = commutation factor. You can only work out the CF if you have the maximum pension and the maximum PCLS and corresponding reduced pension.

What is percentage of commutation?

Commuted Amount : Government Employee pension amount is Rs. 32000/- at the time of retirement, he / she commuted 40% of his pension, then the commuted amount is 40 percent of Rs. 32000 i.e. 12800 is the commuted amount here.

What is commutation rule?

Commutation of provisional pension – (1) A Government servant to whom, pending assessment of final pension, provisional pension has been sanctioned under Rule 64 of the Pension Rules shall be eligible to commute a fraction of such provisional pension subject to the limit specified in Rule 5.

What is pension commutation example?

Such pension received in advance is called commuted pension. For example, at the age of 60 years, you decide to receive 10% of your monthly pension in advance for the next 10 years worth Rs 10,000. This will be paid to you as a lump sum. Therefore, 10% of Rs 10000x12x10 = Rs 1,20,000 is your commuted pension.

What is commutation of pension table?

The lump sum amount of commuted value of pension is calculated with reference to purchase value for the each next birthday as laid down in the Table of values prescribed from time to time and applicable to the applicant on the date commutation become absolute. The commutation table as prescribed by the Govt.

What is the maximum amount of commutation of pension?

Commutation of Pension A Central Government servant has an option to commute a portion of pension, not exceeding 40% of it, into a lump sum payment.

What is the formula for pension calculation?

Average Salary * Pensionable Service / 70 where, Average Salary means the average of the Basic Salary + DA combined, drawn in the last 12 months, and. Pensionable Service means the number of years worked in the organized sector after 15th November, 1995.

Is pension commutation a good idea?

Again, even after pay commission effect, the gap between maximum commuted and non-commuted pension is only Rs 22,410 while the officer gets Rs 23.88 Lakhs as bulk if he commutes by 50%. We strongly recommend that all officers should commute their pension to the maximum allowed 50%.

What is rate of interest on commutation of pension?

make the payment of interest @ 12% per annum of the intervening period i.e. from the date of retirement of the applicants till release to the commuted pension.

Who is eligible for commuted pension?

Commutation of provisional pension – (1) A Government servant to whom, pending assessment of final pension, provisional pension has been sanctioned under Rule 64 of the Pension Rules shall be eligible to commute a fraction of such provisional pension subject to the limit specified in Rule 5.

What is age factor for commutation of pension?

Age Factor ( Commutation calculation as per 6th Pay Commission )

What is the commutation factor for central government employees?

COMMUTATION OF PENSION: Armed Forces Personnel shall be entitled to commute for a lump sum payment upto 50% of their pension….Commutation Factor Table for Central Government Employees.