i am a retired Bank official who has recently opted for the pension with commutation.It is said that since i have availed commutation the full pension will be restored only after 15 years from the date of commutation.My question is what is the calculation /rationale for restoring full pension after 15 years.The commutation is based on the age of the employee.If a peson retired at the age of 60 he will get commutation for 117.72 months only i.e.9.81 years.While restoration will be only after completion of 15 years.

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Rajni Kant,

Commutation is akin to get a present value of your future receivables. The future receipts are discounted at a particular discount/interest rate to arrive at the present value of the future money stream. If they are saying that they would be restoring your pension to full amount after 15 years that means they have discounted only 15 yrs future receipts. Present value of 1 rupee to be receivd at the end of a year for 15 years would be 9.81 rupees if the discount rate is @ 6.75%. I would say this is a very very fair discount rate because if the had discounted at a say@ 8% then the present value would have been much less than 9.81

So actually you should be happy for that because you can increase this money , which you have received in lumpsum and that too taxfree ,at a much faster rate than the said discount/interest rate.

You should be actually happy instead of being sad about the situation!

shashank

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