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Thread: Is commutation beneficial?

  1. #1
    Junior Member s.##ram is on a distinguished road
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    Default Is commutation beneficial?

    I have sought VRS at the age of 56. My basic pay + GP at the time of retirement was Rs. 62550. If I commute 40% of my pension I will get about 13 lakhs as commutation amount and my reduced pension would be 18765 + 18140 = 36905. If I do not commute it would be 31275 + 18140 = 49415. Will it be advantageous for me to take the full pension or commute 40% and take the reduced pension since I have retired early? I think it would be better for me take full pension rather than commute and take reduced pension.

    Also let me know if in the case of VR the HPL at credit would be taken to make up the shortage in 300 days in EL for encashment of leave salary.
    Ramani

  2. #2
    Senior Member Victor is on a distinguished road
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    Quote Originally Posted by s.##ram View Post
    I have sought VRS at the age of 56. My basic pay + GP at the time of retirement was Rs. 62550. If I commute 40% of my pension I will get about 13 lakhs as commutation amount and my reduced pension would be 18765 + 18140 = 36905. If I do not commute it would be 31275 + 18140 = 49415. Will it be advantageous for me to take the full pension or commute 40% and take the reduced pension since I have retired early? I think it would be better for me take full pension rather than commute and take reduced pension.

    Also let me know if in the case of VR the HPL at credit would be taken to make up the shortage in 300 days in EL for encashment of leave salary.
    Ramani
    If you can invest the Rs. 13 lakh amount and get good returns then the same would be beneficial.

    As regards encashment of HPL the same is admissible subject to total of EL+HPL not exceeding 300 days. Also the HPL cannot be commuted to make up the shortfall in EL.

    Victor

  3. #3
    Senior Member ramanrao60 is on a distinguished road
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    Quote Originally Posted by s.##ram View Post
    I have sought VRS at the age of 56. My basic pay + GP at the time of retirement was Rs. 62550. If I commute 40% of my pension I will get about 13 lakhs as commutation amount and my reduced pension would be 18765 + 18140 = 36905. If I do not commute it would be 31275 + 18140 = 49415. Will it be advantageous for me to take the full pension or commute 40% and take the reduced pension since I have retired early? I think it would be better for me take full pension rather than commute and take reduced pension.

    Also let me know if in the case of VR the HPL at credit would be taken to make up the shortage in 300 days in EL for encashment of leave salary.
    Ramani
    Think you will benefit more by commuting considering
    You stand to loose about rs 2760 per month, if you can get risk free return of 9% pa on 13 lakhs,which is very normal,
    but you will get these advantages:-
    capital is intact with you,future DR raises are on full pension and since you are young, in 15 years you will be restored with the commuted portion. So its worth biting the bullet

  4. #4
    Senior Member vnatarajan is on a distinguished road
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    Both Victor and Ramana Rao have made their valid points, echoing the majority view of pensioners.
    I also tend to agree, as I had also opted for commutation way back, and I dont regret.

    Apart from covering "unforeseen risk factor" which doesnt bring any onus on the "would be Family Pensioner", I see a very subtle hidden (positive )agenda in commutation which we have to take into account nowadays.

    Employees in the Bureaucratic heirarchy, unknowingly and unwarrantedly, stray into the Pension Revision and their exhuberant and "yes boss" oriented actions "result in reduction of pensions" which has now led to great litigations as you might have realised!

    Even attempts were being made to "dispose of the Old Pension Scheme" thru "copper shake hand" but it didnt materialise during SCPC Revision.

    THEREFORE A BIRD IN HAND IS WORTH MANY IN THE BUSH.

    WE DO NOT KNOW HOW THE OLD PENSION SCHEME WILL BE TAMPEREED / TINKERED/ MUTILATED BY THE "IMMATURE/ HOSTILE/ ILL-INFORMED" SECTIONS OF ADMINISTRATION AND SO TAKE WHAT COMES READILY IN HOT/ HARD CASH! LEAVE THE REST TO POSTERITY. WE ALL SHALL LIVE TO "REDEEM" OUR COMMUTED PENSIONS AFTER THE "GESTATION PERIOD" CERTAINLY!

    vnatarajan
    Last edited by vnatarajan; 06-12-2011 at 03:06 PM.

  5. #5
    Senior Member prasannakumar is on a distinguished road
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    In my opinion, commutation is very much beneficial because, we will be getting a handsome amount in one lump some which can be invested for better benefits. More over, the money value will not be the same after years.

    Prasanna Kumar

  6. #6
    Senior Member RKPATHAK is an unknown quantity at this point
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    Commutation is always beneficial

  7. #7
    Junior Member s.##ram is on a distinguished road
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    Thanks to all of you, Mr. Pathak, Mr. Natarajan, Mr. Prasanna Kumar, Mr. Raman Rao and Mr. Victor, for the comments. It would help me to commute and get the benefits rather than taking the full pension.
    Ramani

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