Information related to commutation is as follows: -
(1) Commutation Formula = 40% of Basic Pay at the time of retirement x Commutation Factor x 12
(a) At the time of retirement at age 58 = 40% of Basic Pay x 8.371 x 12
(b) At the time of retirement at age 60 = 40% of Basic Pay x 8.194 x 12
(2) The portion of the pension (i.e., 40%) that is commuted is deducted, and the remaining basic pension is deposited into the pensioner's account, but Dearness Relief is received on the entire pension, including the commuted pension.
(3) Travel Allowance, which is admissible every two years with the January/July pension (which is credited to the pensioners' accounts on the first dates of February/August), is received equal to the uncommuted pension, i.e., equal to the total basic pension.
(4) Similarly, the additional pension, which is generally referred to as Old Age Allowance, is calculated on the total basic pension, including the commuted pension.
(5) If the pensioner dies, the deduction of the commuted amount stops, which means that the commuted pension is not recovered from the family pensioner.
(6) You can commute your pension even after retirement. If you apply for this within one year of retirement, you can get your pension commuted without a medical certificate. However, after one year, you cannot get your pension commuted without providing a medical certificate.
(7) We can decide ourselves how much of our pension to commute, but this portion cannot exceed 40% of the pension.
(8) If an employee retiring on medical grounds wishes to commute their pension, they will have to obtain a medical certificate from a board of doctors constituted by the government (Board of Doctors) and will also need to get it countersigned by the C.M.O. of their district.
(9) The benefit of commutation started in March 1971, and the facility to commute 33% of the basic pension was provided. From 1-1-1996, this was increased to 40% of the basic pension. From 1-4-2013, the commutation share was reduced to 20% of the basic pension, and on 1-4-2014, it was slightly increased to 30% of the basic pension. From 1-7-2021, it has been increased back to 40%, and currently, at the time of retirement, we can commute a maximum of 40% of our basic pension.
(10) In March 1971, when the commutation benefit was introduced, there was no provision for its restoration. In 1981, it was decided to restore the commuted pension upon reaching the age of 70, and from 1-1-1996, the restoration period was changed to 15 years, which remains in effect to date.
(11) From March 1971, the commutation rate or factor was 10.46 for those retiring at 58 years of age and 9.81 for those retiring at 60. The Punjab Government, vide its letter dated 29-7-2003, reduced the commutation rate/factor to 6.21 for 58-year-olds and 5.83 for 60-year-olds. This significantly reduced the commutation amount. As of 17-08-2009, the commutation factor was changed again. Now, for those retiring after completing 58 years of age, this factor has been increased to 8.371, and for 60 years of age, it is 8.194.
(12) Benefit of this is that in the event of the pensioner's demise, the remaining balance does not have to be paid by the family, meaning no deduction is made from the family pension.