20 Aug, 2015
Why an overhaul of recruitment, resettlement and retirement polices for the armed forces is necessary.
How does pension work for central government retirees?
Currently, all civilian retirees (recruited before 2004) and all military retirees earn a monthly pension for life that is based on their pay at the end of their service and years of service. This monthly amount has a fixed component called basic pension (typically 50% of last drawn basic pay) and an inflation-indexed component called Dearness Allowance (DA). Also, every 10 years, there is a government-wide pay increase (called the pay commission), during which salaries of all government servants are increased substantially. Retirees’ basic pension is also increased during pay commission reviews, though not by the same percentage as salaries.
E.g. Consider a Deputy Commissioner of Income Tax who retired in 2008 after 35 years of service with a basic pay of 35,000. Let’s call him Ram. Ram’s basic pension would be 17,500. In 2008, the central government’s dearness allowance was 16% of basic pay, and so he would have earned a total pension of 1.16 x 17,500 = ~20,000 per month in 2008. By 2015, the Dearness Allowance (roughly an inflation index) has been gradually raised to 110%, and so he will now receive 2.1 x 17,500 = ~37,000. In addition, in 2018, if there is another pay commission, his basic pension will also be adjusted up significantly! In other words, he will on average, have at least ~5-7% year-on-year increase through DA plus a major increment every 10 years in his retired life.
What is OROP?