Notes:
From the seminar held at CDM on 5 Mar 14
Words in
parenthesis ( ) are inserted by Aerial View to make for easier reading.
Certain parts,
such as salutations have been edited out (indicated by missing paragraphs) but
the gist has been re-typed intact.
Enhancement of Pension: Compensating for Truncated career
Col
Ganesan Muthu Kumar SM
* * * * *
Xxxxxxxxxxxxxxxxxx
6. Let us see the definition of Pension.
What was it? Was it really a bounty? No. The Hon’ble Supreme Court has made it
amply clear that that it is the justified, rightful remuneration for the
greatest duty performed in the service of the Nation………
7. Let us look at what other countries are
doing. It is not a question of developing versus developed nations etc. If we
consider only democratically run Governments where the Military does not call
the shots, even then we can see the world over nations going miles to make the
lives of Veterans better. In the USA, the pension can reach up to 100% of the
basic pay for those who have served 40 years and the pension or compensation
depends on Consumer Price Index, which means the pension depends on the cost of
living of the day!
8. In the UK, one of the best pension
schemes which is dependent on the last salary drawn and the terms of Service.
The Veterans also get a lump sum after 18 years. Even with very less service,
one can expect a pension till the age of 65 years. There are many countries
that offer severance pay or some form of the Golden hand-shake….
9. The scope of the study group was,
therefore very clear. The approach was deliberate. A wide cross-section of
people was contacted. Huge number of responses was received amounting to more
than 7500 of which Army, Navy and Air Force were represented by 75, 4 and 21
percent respectively.
11. If we see the Armed Forces pay and pension
milestones, the first CPC was sympathetic to the Veterans, and so were the
Post-War Committee for Defence Personnel as also the Armed Forces Pension
Review Committee. The Second CPC was also indulgent towards military personnel.
Raghuramaiah Committee had also given some good recommendations and had equated
military officers with those of the IPS. The huge decline as seen today started
after the 4th CPC right till 6th CPC.
12. The higher edge that soldiers had over
their civilian counterparts till the 3rd CPC has now been lost and
reverse progression have truly reached a state of concern. If we compare
present and past pensions, the following is evident: -
|
ANALYSIS
|
|
Comparison of Pension: 1935-53
Armed Forces Personnel : 50-100%
(2nd Lt to Maj Gen)
Civilian Govt employee: 37-50%
|
|
Armed Forces eligible for pension after
15 years service
Civilian counterpart eligible for pension
after 25 years service
|
|
COAS at Rs 1000 compared to Rs 416/- for
top civil servant
|
|
As on date pension increase 45 times for
COAS and 108 times for top civil
servant
|
|
Pension of Armed Forces higher than
civilian till 3rd CPC
|
13. The general pension as such today is what
you are already aware of which amounts to only 50% of the last drawn pay with a
gratuity ceiling of Rs 10 lakh and the commutation pegged at 50% for a time
frame of 15 years. It is topped with a leave encashment of only 300 days,
immaterial of the actual number of days one could not avail his leave due to
exigencies of service.
14. It is seen that the military man enters
service early and also exits also quite early. His civilian counterpart may
enter service a few years later but continues to serve till such time he
retires, generally at 60 years of age of the maximum retirement age thereby
demitting office with a higher pay and going home, consequently, with a higher
pension. All this results in a huge difference with the military person losing
about 16 years of service.
15. Hence the disadvantages faced by the
military men are many. Incomplete family responsibilities are frightening. Not
every individual picks up a job. Lateral absorption assured by the Govt in 6
CPC has not really been fulfilled, with inter and intra Ministries not helping
the young Veteran.
16. The Home Ministry has not paid much heed to
the Kargil review Committee or other respected voices for lateral absorption
and saving on training and recruitment costs resulting in wastage of skilled
manpower. Then, when the military man reaches senior ages, the reduced medical
fitness, mostly aggravated by life conditions and stresses of a typical service
life, loses out even more.
17. Hence the study group arrived at a point
that there is need to enhance the pension by X factor. This X factor had to be
calculated scientifically and realistically. Instead of the 50% that we get
today, it needs to be enhanced to 50% + X factor with DA on the whole sum.
There were three models that were considered.
Model I
18. Since the maximum personnel in PBOR retire
at the ranks of Havildar and Subedar and maximum number of officers retired in
the ranks of Colonels and Brigadiers, these four career paths were chosen to
flow with that of their equivalent civilian counterparts. A few logical
assumptions were made such as incorporating their respective ACP (Assured
Career Progression), the Pay Commissions, increments etc. Common benefits like
travel and medical allowances/entitlements were left out. Benefits unique to
the Armed Forces like entitle rations and CSD were factored in. Pay commission
rises, increments were also factored in. Hence the lifetime emoluments were
calculated as judiciously and as accurately as possible. Thus the lifetime
disparities between the two classes were calculated. In the case of Havildars
it was seen that an approximate amount of Rs One crore and nine lakhs was the
net lifetime disparity and can be seen from the table below. In their case an X
factor or necessary hike in pension works out to be 24.7%
|
Life
time Emoluments
|
||||
|
Retd
as Havildar
|
Civilian
equivalent
|
|||
|
1991:
Joins at age 19
|
1997:
Joins at age 25
|
|||
|
2016:
retires at age 44
|
2032:
retires at age 60
|
|||
|
Gen
pension till 66
|
Gen
pension till 66
|
|||
|
Family
pension for 7 years
|
Family
pension for 7 years
|
|||
|
Life
expectancy Male (2011 est) – 66.08 years
Life
expectancy Female (2011 est) – 68.33 years
Wife’s
assumed age 5 years less than husband
|
||||
|
|
Havildar
|
Civilian
equivalent
|
||
|
Net
pay
|
Rs
46, 84, 436
|
2,
14, 36, 927
|
||
|
Net
pension
|
2,21,18,291
|
1,
68, 71, 254
|
||
|
Misc
|
5,
69, 670
|
|
||
|
Total
|
2,73,
72, 398
|
3,
83, 08, 181
|
||
|
Net
disadvantage to Havildar
|
1,
09, 35, 785
|
|||
|
Disparity
as percentage of net pension
|
49.4%
|
|||
|
X
factor (= 49.4 / 2)
|
24.7%
|
|||
|
Pension
|
81%
|
44%
|
||
|
Pay
|
17%
|
56%
|
||
|
Misc
|
2%
|
-
|
||
|
RECOMMENDATION
|
||||
|
Retiree
Groups
|
Disparity
(%)
|
Weighted
mean
|
||
|
Havildar
(and below)
|
24.7
|
24.7
x 0.72 + 19.6 x 0.28 = 23.3%
|
||
|
Subedar
(and above)
|
19.6
|
|||
|
Colonel
(and below)
|
16.6
|
16.65
x 0.90 + 10.3 x 0.10 = 16%
|
||
|
Brigadier
(and above)
|
10.3
|
|||
|
X
Factor = 22.6%
|
||||
19. Hence, the lifetime emoluments and
disparities were calculated for all four career paths and finally a weighted
mean was arrived at to derive the X factor, which worked out to be 22.6%.
Model II
20. Quantification using lifetime paths for
both civilians and military counterparts was worked out. Last five years data
was surveyed as to how many personnel retire in what ranks and accordingly
average retirement age and average emoluments were worked out and compared.
Male and female expectancies as on date were also factored in. Wife’s age as
per common Indian customs was taken to be 5 years younger that the husband’s so
as to work out the family pension. Details are given below:
|
AVERAGE
AGE OF RETIREMENT: JCO/OR
|
|||||||
|
|
Army
|
Navy
|
Air
Force
|
Overall
|
|||
|
Service-wise % of borne strength
|
0.88
|
0.04
|
0.08
|
|
|||
|
|
Age
|
%
of total
|
Age
|
%
of total
|
Age
|
%
of total
|
|
|
Average of recruitment of JCO/OR
|
19
|
|
20
|
|
20
|
|
|
|
Retirement age of Sep/Eq in years
|
38
|
0.12
|
|
|
|
|
|
|
Retirement age of Naik/Eq in years
|
43
|
0.1
|
|
|
|
|
|
|
Retirement age of Hav/Eq in years
|
45
|
0.42
|
45
|
0.78
|
54
|
0.76
|
|
|
Retirement age of Nb Sub/Eq in years
|
47
|
0.04
|
49
|
0.15
|
54
|
0.14
|
|
|
Retirement age of Sub/Eq in years
|
49
|
0.27
|
52
|
0.05
|
54
|
0.06
|
|
|
Retirement of Sub Maj/Eq in years
|
51
|
0.05
|
54
|
0.02
|
54
|
0.04
|
|
|
Average age of retirement
|
45.42
|
|
46.13
|
|
54
|
|
46.3748
|
|
Length of service of PBOR
|
26.42
|
|
26.13
|
|
37
|
|
27.2548
|
COMPARISON
MODEL – PBOR
|
Post
retirement of JCO/OR vis-Ã -vis Civilian
|
||||
|
Average
Pension Drawn (PBOR)
|
9734
|
|||
|
Average Pay Drawn (Civilian) 46.37-60
years
|
17890
|
|||
|
Average Last Pay drawn (civilian)
|
20850
|
|||
|
Difference
in carry home pay
|
||||
|
Age
|
JCO/OR
|
Civilian
|
||
|
46.37
|
60
|
15,
91, 546
|
29,
25, 173
|
|
|
60
|
66.08
|
7,
10, 199
|
7,
60, 592
|
|
|
61.08
|
68.33
|
28,
09, 863
|
42,
29, 939
|
|
|
Loss
in carry home income to JCO/OR – Rs 14, 20, 076
|
||||
|
Pension
to compensate for loss – 75.27% of last pay drawn by JCO/OR
|
||||
COMPARISON
MODEL – OFFICERS
|
Post
retirement of JCO/OR vis-Ã -vis Civilian
|
||||
|
Average
Pension Drawn (Officer)
|
34025
|
|||
|
Average Pay Drawn (Civilian) 54.3-60
years
|
71504
|
|||
|
Average Last Pay drawn (civilian)
|
35742
|
|||
|
Difference
in carry home pay
|
||||
|
Age
|
Officer
|
Civilian
|
||
|
54.3
|
60
|
24,
27, 942
|
48,
92, 198
|
|
|
60
|
66.08
|
24,
82, 441
|
26,
08, 440
|
|
|
61.08
|
68.33
|
17,
76, 089
|
18,
66, 236
|
|
|
Total
|
65,
86, 472
|
93,
66, 874
|
||
|
Loss
in carry home income to Officer – Rs 27, 80, 402
|
||||
|
Pension
to compensate for loss – 71.1% of last pay drawn by Officer
|
||||
21. Hence, comparison models for officers and
PBOR were arrived at showing the respective losses in carry home pay and hence
the X factor was worked out to be 25% at an average.
Model III
22. In some countries the Reference Pension
model was used. It was also used in the UK. The Chief’s pension was pegged as
the reference and the other rates were fixed at approximated percentages of the
reference pension. In olden days, as discussed earlier, the Chief’s pension
comparison would have had huge benefits and since military pension had
considerable edge over civilian counterparts. However, in today’s scenario,
though the Chief’s pay is pegged equal to their Cabinet Secretary, while
working out it was seen that the pension calculated by a reference formula
giving adequate weightage also to the number of years of service tenanted did
come up with better prospective (QYS – qualifying years of service). The model
is given below:
|
MODEL:
REFERENCE PENSION
|
|||
|
Rank
|
Amount
|
Percentage
|
QYS
|
|
COAS
|
1000
|
100
|
30
|
|
Lt
Gen
|
950
|
95
|
30
|
|
Lt
Gen
|
900
|
90
|
30
|
|
Maj
Gen
|
875
|
87.5
|
30
|
|
Brig
|
825
|
82.5
|
28
|
|
Col
|
750
|
75
|
24
|
|
Lt
Col
|
675
|
67.5
|
20
|
|
Sub
Major
|
400
|
40
|
24
|
|
Sub
|
320
|
32
|
23
|
|
Nb
Sub
|
300
|
30
|
21
|
|
Hav
|
280
|
28
|
19
|
|
Naik
|
250
|
25
|
17
|
|
Sep
|
220
|
22
|
15
|
|
Rank
|
Max
Pension Post 2006
|
R%
wrt Chief’s Pension
|
Pension
at R%
|
Increase
in pension
|
|
Sub
Maj
|
13425
|
40
|
18000
|
4575
|
|
Sub
|
11970
|
36
|
16200
|
4230
|
|
Nb
Sub
|
10675
|
33
|
14850
|
4175
|
|
Hav
|
10029
|
30
|
13500
|
3471
|
|
Naik
|
7725
|
26
|
11250
|
3525
|
|
Sep
|
7720
|
22
|
9900
|
2180
|
23. After all models were worked out, along
with inputs from the environment, discussion took place. Informed views were
sought and after working out with sufficient inputs, and as an alternative
option to the Govt, something like a Golden Handshake was looked at. Severance
Pay or Overtime Pay Out places a lesser burden on the Govt by a formula of 25%
of last pay drawn for the number of years of age subtracted from 60 was looked
at. This was called the severance package formula. It was working out to be Rs
1800 crores for PBOR, Rs 130 crores for officers and Rs 3500 crores for all three
services taking into account average number of retirees per year.
Disability Pension
24. Some other aspects were also looked at. I
would like to touch upon them in a macro fashion, although the study team did
look into it very minutely. The first one is about disability pension. There is
a section in the “Person With Disability Act 1995” Section 47 which states that
a disabled person cannot be denied pension merely on the ground of disability
and that he will continue to earn pay as well as pension like other regular
counterparts. This section was modified to exempt the Armed Forces in a
gazetted notification dated 13 Apr 02. Although the aim was noble as the Armed
Forces personnel need to be active and medically fit, it affected natural
justice as it led to huge inequality with respect to civilian counterparts who
would invariably continue to serve till the age of 60 years or the retirement
age, and this when the odds to get disabled are much more in the case of Armed
Forces personnel due to conditions of service.
25. It was recommended that either by parallel
absorption in other Central Govt posts or in some other manner that disabled
Armed Forces personnel need to be cared for and supported in the same manner as
the civilian employees without forcing them out of service with minimal
benefits, (which are habitually challenged by DESW – Aerial View).
Broad banding of Pension
26. The broad-banding or reading 1% to 49% as
50%, 50% to70% as 75% and 76% to 99% as 100% was applicable only to certain categories
and not to all. Accordingly, it could be surmised that broad banding being a
benevolent consideration being meted out to the disabled personnel can be
actually (and) pragmatically extended to all since omitting certain categories
arbitrarily is not justified. For example, those superannuating from service
with disabilities as per current policies, will not be eligible for broad
banding. It was accordingly recommended that such anomalies must be done away
with. It was brought out that individuals going home with disability on
superannuation also need to get the benefit of broad banding of disability
pension.
Constant Medical Attendant
27. There are many Veterans who take to bed due
to various illnesses and accidents and need to be cared for around the clock
with human assistance. At present, the entitlement for a constant medical
attendant subject to current provisions is not useful since their emoluments
are restricted to Rs 3000. This is in huge contrast to even, what in minimal,
stands for with sufficient calories in food, essential clothing, medical care
for self etc. It is difficult for such attendants to survive today on Rs
3000.
28. Hence, it was recommended that such
constant medical attendants would need to be paid (remuneration) equal to PB 1
with DA or at least the minimum wages prevailing in the Area or Sub-Area. In
addition, it was recommended that two attendants be authorised for 24 x 7
care.
Family Pension
29. There are four types of Family pension.
Ordinary family pension is paid to all widows in case of death in service and
if neither aggravated nor attributable to service which amounts to 30% of last
reckonable emoluments. Enhanced Ordinary Family Pension (EFP) is applicable
when personnel die early and is 50% of last reckonable emoluments for 10 years
if the personnel was serving at the time of death and 7 years if after
retirement, as well as 60% of last reckonable emoluments if aggravated due to
service, and 100% of last reckonable emoluments if death occurred in the face
of enemy.
30. The fact that the family pension (being
reduced to) 30% once the head of the family dies was causing untold hardships,
as that point when the family needs maximum financial resources, the study team
recommended that ordinary family pension should remain at 50%.
|
SUMMARY
OF RECOMMENDATIONS
|
|
Increase general pension as per models
|
|
Sec 47 to be made applicable to Armed
Forces
|
|
Disability whilst on leave to be made
attributable to service
|
|
Applicability of broad banding to all
categories of disability pension
|
|
Increase in constant attendant allowance
|
|
No change in family pension on the demise
of pensioner
|
OROP
|
COMPARATIVE
ANALYSIS: PRE AND POST 2006 PENSION
AS
ON DATE
|
|||
|
Rank
|
Pre-2006
pension as on 24.9.2012
|
Post
2006 Average Pension
|
Difference
|
|
Maj
|
18205
|
-
|
-
|
|
Lt
Col
|
26265
|
34000
|
7735
|
|
Colonel
|
27795
|
35000
|
7205
|
|
Brigadier
|
29145
|
36500
|
7355
|
|
Maj
Gen
|
30350
|
38500
|
8150
|
|
Lt
Gen (HAG)
|
36500
|
40000
|
3500
|
|
Lt
Gen (HAG+)
|
40000
|
40000
|
-
|
|
COAS
|
45000
|
45000
|
-
|
|
ONE
TIME INCREASE TO EQUAL WITH POST-2006 PENSION
|
|||||
|
Rank
|
Pension
on 24.10.12
|
Post
2006 Avg Pension
|
Diff
|
No.
of pre-2006 officers pensioners
|
Monthly
Financial implication
|
|
Maj
|
18205
|
-
|
-
|
-
|
-
|
|
Lt
Col
|
26265
|
34000
|
7735
|
12490
+ Maj 1294
|
106619240
|
|
Col
|
27795
|
35000
|
7205
|
9037
|
65111585
|
|
Brig
|
29145
|
36500
|
7355
|
7891
|
58038305
|
|
Maj
Gen
|
30350
|
38500
|
8150
|
3428
|
27938200
|
|
Lt
Gen (HAG)
|
36500
|
40000
|
3500
|
1266
|
4431000
|
|
Total
|
26,21,38,330
|
||||
Annual Financial implication: Rs 559
crores
P.S:
Rest of the text (8 paragraphs) on OROP has been omitted as the matter
is under active consideration of MoD, Service HQ, CGDA and some ESM - Aerial
View
* * * * * *
Concluded
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