Pension CommutationRetiring benefits of employees consist of two elements.PensionCommutation/Gratuity

Pension is paid monthly while commutation is one time lump sum payment at the time of retirement.

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What is CommutationCommutationof 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 ageAfter 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 FormulaGross 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 FormulaCommutation = Commutation Rate x Gross Pension x Rate as per Age Next Birthday x 12

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Commutation Rate as Per Scale Adopted*

NOTE : Restoration of Commuted portion of Pension had been discontinued with effect from 01-12-2001

SCALES01-07-200801-12-200101-07-1986BEFORE 1986COMMUTATION35 %40 %50 %25 % Gratuity(Compulsory)NET PENSION65 %60 %50 %25 % Commutation (Optional)

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

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Commutation Rate (1986 Scale)

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Commutation Calculation FormulaCommutation = Commutation Rate x Gross Pension x Rate as per Age Next Birthday x 12 = 50% x 4959 x 16.7925 x 12 = Rs 499644/-

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

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Commutation Rate Table (2001 Scale)*

Commutation Calculation FormulaCommutation = 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 PracticeAfter 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 IssueA Government Pensioner filed writ petition in Lahore High Court to apply Pensionincreases on commuted portion and add it to existing pension.

Petition decided in Pensioners favor despite the ICA filed by Deputy accountantGeneral 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 mentionedthat 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 Pensioners = 11,718

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Double Pension Calculation Example

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