pension

Principled And Notional Aspects Of 7 CPC Pension Refixation

The recommendations of 7 CPC define broad principles as well as detailed methodologies for implementing the principles as related to fixation of pay of serving armed forces personnel and pensions of current (post 01 Jan 2016) and older (pre 01 Jan 2016) pensioners.

The 7 CPC pay matrix is the foundation, the corner stone of implementation.

In relation to principles defined for fixation of pensions of older civilian retirees, nothing could be clearer than the section of 7 CPC report sub-titled “Parity in Pension between Pre and Post Seventh CPC Retirees“, starting at para 10.1.53. Para 10.1.54 further underlines the importance of such parity citing “the viewpoint of inter-temporal equity”. To fix pensions in accordance with these principles, the 7 CPC report defines the methodology in para 10.1.67 in relation to pay matrix for civilian pensioners and, in exactly similar terms, for defence services pensioners at para 10.2.87, in relation to the pay matrix for defence personnel.

All affected already know that two different methods were prescribed in para 10.2.87 for refixing pensions for older (pre 01 Jan 2016) ESM.

The second method of multiplying by 2.57 the existing VI CPC pension, OROP in the case of ESM, was used first.

The first method of calculation required older (pre 01 jan 2016) retirees to, and I quote here from the 7CPC report, “be fixed in the Pay Matrix being recommended by this Commission, on the basis of the Pay Band and Grade Pay at which they retired, at the minimum of the corresponding level in the matrix. This amount shall be raised to arrive at the notional pay of the retiree by adding the number of increments he/she had earned in that level while in service, at the rate of three percent”. Military Service Pay was to be added to this notional pay and the total divided by two to arrive at the 7CPC pension.

Now, this method of calculating the notional 7 CPC of an older, pre 01 Jan 2016, retiree itself had a few issues that needed resolution. To name a few:

  • There was no co-relation in the matrix between the QS of older retirees with that of currently serving personnel for the purpose of fixing the older pensioners’ notional pay. The notional pay was intended to be based on just the number of increments earned by the older retiree. For example, in the case of Officers, a Wing Commander who retired in 2004 with a certain number of increments in the old scale 13500-17100 had correspondingly half that number of increments in the equivalent PB-4 37400-67000 of 6 CPC in the table published vide Amendment to SNI/2/2008. This by itself would cause the “notional pay” of the 2004 retiree to be fixed at par with a 6 CPC or a post 01 Jan 2006 retiree of the same rank who had put in much less service than the 2004 retiree.
  • The recommendations of 7 CPC intended to bring about “inter-temporal equity” by fixing the 7CPC notional pay of older retirees by fixing them in the level corresponding to the “pay-band” and “grade pay” in which they had retired. However, pay-bands and grade-pay came into being only after 01 Jan 2006. For ESM who had retired earlier, there were pay-scales and no “grade-pay”. Though the 5 CPC pay-scales had equivalent 6 CPC pay-bands, but, as mentioned previously, the number of increments in the 5 CPC pay-scale and those in the 6CPC pay-band did not have one to one correspondence. For x increments in the pre 01 Jan 2006 pay-scale the corresponding no. of increments in the 6CPC pay-band were 0.5x for a pre 01 Jan 2006 Wg Cdr retiree.
  • Also, the concept of “notional pay”, based on just the number of increments in the pay-scale corresponding to stages in current level of 7 CPC Matrix, got further diluted in light of the fact that current, even post 01 Jan 2006 retirees, migrated to the level (or 6 CPC pay-band) at a much earlier stage of service than the pre 01 Jan 2006 retirees in some cases. That is to say, as an example, an older, pre 01 Jan 2006 Wg Cdr retiree with, say x increments, in a pay scale-that started at a QS of 18 years would have a notional pay of a post 01 Jan 2017 2016 Wg Cdr at stage 0.5x in the matrix who would have migrated to level 12A for Wg Cdrs at a QS of just 13 years i.e. The older pre 01 Jan 2006 Wg Cdr retiree with a QS of 18+x years would have the notional pay of a post 01 Jan 2017 2016 Wg Cdr with a QS of 13+0.5x years.

The concept of achieving inter-temporal equity in terms of pensions of older retirees is entirely rational. But for that the notional approach needs to be re-examined. What manner of notional pay should an older retiree have for “inter temporal equity”? The older retiree should have a 7 CPC notional pay of a currently serving individual with equal service and of the same type of enrolment/commission at a level and stage of the matrix attained by the currently serving person (or current, post 01 Jan 2017  2016 retiree) and who attained the stage and level of the matrix by virtue of passage of time alone.

A currently serving Officer with the same service as a pre 01 jan 2006 Sqn Ldr retiree with 20 years of QS would be at Level 12-A at (minimally) stage 7, having migrated to level 12A from level 11 at a QS of 13 years, whereas the 7CPC report seeks to achieve “inter-temporal equity” by keeping the older retiree in level 11 of the matrix. So this calls into question the logic that states, “…to arrive at the notional pay of the retiree by adding the number of increments he/she had earned in that level while in service“.

Notions need to be rational and based on reality. What happens in the case of a post 7CPC retiree, again taking the example of the older Sqn Ldr, is that an Officer migrates to level 12A from 11 at a QS of 13 years on the basis of passage of time alone as promotions are much faster. If there has to be “inter-temporal equity”, then the notional fixation should be based on not just the number of increments in the old scale which, as pointed out earlier, would fall well short of ensuring pension parity as they do not correspond 1 to 1 with increments earned post 01 Jan 2006. The level and stage of the matrix that currently serving personnel, with the same QS, type of enrolment/commission as older pre 01 Jan 2006 retirees, attain based on passage of time alone would be the equitable points in the 7 CPC matrix for fixing the notional pay of the older retirees.

However, even with all the serious issues highlighted above, the 7 CPC methodology may have been a little better than the actual methodology now adopted vide circular 585 which seeks to fix the notional pay at each intervening pay commission between retirement and 01 Jan 2016. So disparities between stages/levels in the 7CPC Pay Matrix attained by currently serving/retiring personnel as against those “notionally” fixed for older, especially pre 01 Jan 2006, ESM would continue to remain unaddressed, if not exacerbated.

These issues had been touched on previously when implementation of 7 CPC was still being discussed. Though some of the amounts and logic may have changed with the issue of circulars and amendments, the concept of a desirable and fair notional progression as shown in this table  still merits consideration.

 

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