pension

7 CPC : Options 1 And 2 For Fixation Of Pensions Of Pre 2016 Armed Forces Pensioners

Due to the wording of recommendations of 7 CPC, some doubts were expressed as to which is Option 1 and which one is No. 2.

Item 10.2.87 of 7 CPC recommendations spells it out though it may not be clear at first reading.

Briefly, 7 CPC recommendations have two methods of calculating pensions for pre 2016 armed forces pensioners. The first method is based on increments earned as described at item 10.2.87( i ) of 7 CPC recommendations. The 2nd method of calculation is the formula of 2.57X(Pension as on 31 Dec 2015) as described at item 10.2.87(ii) of 7 CPC recommendations.

However, 7 CPC recommendations state that the 2nd formulation be used first, followed by the 1st one at a subsequent date. Illustrations at items 10.2.89 and 10.2.90 of 7 CPC recommendations call method 1 as Option 2 and Method 2 as Option 1.

For this, relevant extract of 7 CPC Recommendations, duly highlighted, can be viewed by clicking on this link.

Now, of course, the implementation instructions issued by MOD have used only the 2.57 X calculation (i.e. Method 2 aka Option 1 of 7 CPC recommendations). For this, Circular 570 and MOD letter of 29th October 2016, both duly highlighted, can be viewed by clicking on this link .

In brief, Option 1 is the 2.57 X calculation (it is method no. 2 in 7 CPC Recommendations) and the increment based index determination calculation is Option 2 (It is method no. 1 in 7 CPC recommendations).

Circular 570 has clarified vide para 19 that the 7 CPC committee will determine how and when to revise pensions under Option 2 [i.e. if, how and when will 7 CPC pensions now being implemented with Option 1, which is method no.2, be revised as per Option 2, which is method no. 1].

With this clarification in place, the previous blog post can be looked at to understand what sort of variations and differences could result between the two options.

{Update: With the release of a Press Note on 04 May 2017, Method 1 / Option 2 of CPC recommendations appears to have given way to a Modified Formulation }

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