RULES & APPLICABILITY OF THE PROPOSED UNIFORM RATE OF30% OF LAST PAY DRAWN AS FAMILY PENSION W.E.F. 01/04/2021 ON OUR GENERAL INSURANCE EMOLOYEES PENSION SCHEME 1995

FAMILY PENSION

When Family Pension is Payable

1. Where an employee deceases after completion of one year of continuous service or before completion of one year of continuous service who was examined by a medical officer approved by Company prior to appointment.

2. When a Former Employee dies After retirement from service.

3. When a Retiree/spouse dies leaving behind Dependent Children

Rate of revised Family Pension (on Proposed Rate):

Revised Ordinary Family Pension is calculated based on the last pay drawn by the employee at the time of retirement at 30% without ceiling (at Prosed Rate).

Pay- Basic pay including Stagnation increment and all allowances counted for the purposes of making contribution to the Provident Fund.

Family Pension will commence from the date following the date of death of the employee/pensioner.

ENHANCED RATE OF FAMILY PENSION:

Where the employee has completed 7 years of continuous service at the time of death family pension may be paid at the Enhanced Rate of 50% of last drawn or twice the ordinary rate of family pension whichever is less for a period of 7 years or till the deceased employee attains the age of 65 years had he survived.

PERIOD OF PAYMENT:

The period for which the Ordinary Family pension Pyable is.

a) In case of widow/widower, up to the demise or re-marriage whichever is earlier.

b) In case of son, until he attains age of 25 or until he gets married whichever is earlier.

c) In case of unmarried daughter, until she attains age of 25 years or until she gets married whichever is earlier.

d) The total income of the children should not exceed Rs. 2550/- per month and for parents wholly dependent on him should not exceed 2550/- provided he has left no widow/widower or child after him.

e) However, a son or daughter shall continue to get family pension if he or she suffers from any mental or physical disability irrespective of attaining 25 years of age.

After the demise of the employee the family pension will be paid in the following order:

a) Widow or widower (if not remarried).

b) Children in order of birth. Youngest one will become eligible only if elder ones become ineligible.

c) Disabled child will receive family pension for life, if nobody else is Eligible.

Payment to twins and widows: It will be paid in equal shares in case of twins and to widows in case there is more than one.

Receipt of two-family pensions: In case of demise of both husband and wife who were employees of the bank, the child will get two family pensions subject to ceiling on the total amount of pension

METHOD OF CALCULATION OF FAMILY PENSION ON THE BASIS OF PROPOSED UNIFORM RATE OF 30%

Ordinary Pension:

The eligible ordinary family pension will be generally at 60 % of the existing Basic pension ie. before commutation. (For those who drawn increment during last 10 months of their service, their last drawn pay would be more than their average emoluments. In such cases their eligible FP would be slightly more than 60 % of their basic pension). In such cases they have to refer their Pension calculation sheet where in last pay drawn particulars are available). Ordinary eligible family Pension is at 30% of last drawn pay. The revision is effective from 01.04.2021.

Dearness relief on family pension will be as appliable for the period of retirement. It is at the current rate that the retiree is drawing. For example, Current DR for those who retired between 01.11.2007 to 31.10.2012 is at187.35%

Sample calculation:

An Employee retired during 2009, drawing basic pension of Rs 18,805/- (before commutation). Last drawn pay and Average emoluments are same. Last drawn Pay-Rs 37,610/-

Now revised FP is calculated as follows

Family Pension at 60% of Rs18,805/-(present basic pension)=Rs11,283/-( this is same as 30% of Rs 37,610/-)

DR at 187.35% =Rs 21,139/-

Total Eligible family pension with DR = Rs 32,422/-

Enhanced Family Pension:

It will be the same as the Service pension of the pensioner.

The enhanced eligible Family pension would be at 50% of average emoluments drawn by the deceased/retired employee. (This is because that the twice the rate of ordinary pension i.e. 60% should not exceed the service pension sanctioned to the pensioner. Service pension is sanctioned based on average emoluments and not on last drawn pay)

How long the Enhanced Rate of Family Pension shall bepayable.

In the event of death of an employee after

retirement, enhanced rate of family pension shall be payable for a period of seven years or for a period up to the date on which the retired deceased employee would have attained the age of sixty-five years had he survived, whichever is less; in short applicable enhanced family pension will be payable will be payable maximum for 7 years or till the date that the pensioner/employee would have attained 65 years of age whichever is earlier.

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THE FALLACY OF FUNDING SCHEME BEING AN OBSTACLE TO PENSION UPGRADATION:- AN ARTICLE BY Mr. C H MAHADEVAN FORMER EXICUTIVE GM LIC

We have seen the stock argument of LIC in our legal case both in Delhi High Court and also in the Supreme Court as revealed in LIC's Counter Affidavits  that the Pension Scheme for LIC employees is a 'funded scheme' while that for Central Government employees is a 'Pay as you go' scheme citing it as a reason for  the inability of the Corporation to pay upgraded pension.

There is a glaring fallacy  in the argument of the  LIC for various reasons.

First and foremost, both our Pension Scheme and the Central Government Schemes are defined benefit schemes with a definite legal obligation to pay such benefit to the pensioners.So the question arises as to whether a scheme is defined by  the  statutory legal obligations  which  an  organisation has to fulfil or  by the mechanism set up for meeting such obligations.

If the funding mechanism had not  been put in place ,would  not the statutory  obligations still remain to be fulfilled through some other mechanism even if it is not under 'Pay as you go'?

The funding mechanism with a prescription in the pension rules for  annual actuarial valuation of  liabilities eminently enables the monitoring of the scheme both in terms of actual experience as well as in terms of quantification of the liability every year for budgeting purposes.There have been some defence  of the Central Government system with the argument that the Government can take up printing of notes when faced with a deficit.When such a situation arises,what will happen to the financial health and monetary equilibrium of our country's economy?The ultimate sufferers will be the people at large due a surge in inflation that will result, as financial prudence would be  given a go by for expediency.

It is worth noting that due to the pressures  that ravaged   the economy due to the Covid pandemic. the Central Government brought in a moratorium on payment of increase in  Dearness Allowance for employees and on increase in  Dearness Relief for pensioners  for the period from 1/1/2020 to 30/6/2021.Such a freeze did not happen in the case of LIC employees and pensioners for the reason that LIC employees were protected by Gazetted wage revision Notifications while pensioners were protected by the LIC Pension Rules 1995 supported by a funded scheme.

The logic advanced so far by LIC has been demolished  the moment the Central Government approved the upgradation of pension for the RBI employees in March 2018 albeit with prospective effect while theirs is  also a funded scheme.

Secondly, even though it is a funded scheme in LIC for all pensionable employees, despite the funding, the provision for the  pay-out cannot be said to be taking place in an equitable manner.The PF surrendered had been on a uniform scale for all the employees, while the benefits paid to officers governed by Rule 55B are relatively higher than for  the other pensioners for the reason that they are paid out of the LIC Pension Fund the amounts of pension  as payable to Central Government pensioners which includes upgraded pension arising out of implementation of Central Pay Commission Recommendations once in every ten years.Even on an actuarial basis, there is a discrimination in the matter of determining additional contribution to the Pension Fund with a higher share in respect of officers covered by Rule 55B than that for  the employees not covered by that rule.With this kind of discriminatory dispensation, it  is untenable for LIC to argue that additional liability cannot be borne for upgradation of pension for pensionable employees.

Thirdly, the  funding scheme  for LIC pensioners is in two parts ,viz the one with the Pension Trust which mostly belongs to the serving employees and the other with the P & GS department of LIC with whom the Trust has purchased immediate annuities for payment of pension for retirees and family pensioners .The amount collected by the P & GS dept for payment to pensioners will be clubbed with that collected under immediate annuities in one fund and the advantages of such clubbing will flow to the LIC in the commercial sense.This is the advantage that is derived by LIC as an insurer selling immediate annuities at the same time funding for the Pension liabilities as an employer.

Thus we can be sure that the LIC Pension Scheme as a funded scheme is a beneficial arrangement for LIC rather than a hindrance to upgradation of pension.

In my view, the 'Pay as you go'  scheme is one of expediency and a  'Funded' scheme is one of  financial prudence.The added advantage for LIC as an insurer is the incidental commercial opportunity it provides as an immediate annuity scheme for a group of about 60000 pensioners that it administers.The number will go on increasing at least upto 2045,when more than 95% of the employees covered by the LIC Pension Scheme would have retired.The total number of serving  employees who are pension optees together with the pensioners may be about 1,50,000 as on date including those who have joined the Scheme after OMOP.So the Funded Scheme is a gainful proposition for LIC and no stumbling block for upgradation.

 C H Mahadevan

RETIREMENT FUNCTION HELD AT THRISSUR DO

RETIREMENT FUNCTION HELD AT TRIVANDRUM DO3

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