On 20 February the government notified a change in the Employees Pension Scheme (EPS), 1995 which is likely to benefit over 6 lakh pensioners as per reports. According to the notification, eligible members of Fund Organisation (EPFO) will get normal pension if they had opted for commutation of pension. Lets understand in detail what is commutation of pension and how and who will benefit from this.
As per the EPS, a member eligible for pension was allowed to take part of their monthly pension as lumpsum in advance. This is called commutation of pension. As per the previous rules an employee could commute (or take as lumpsum) up to one third of the monthly pension and receive 100 times of the amount as lumpsum and opt for reduced monthly pension for the rest of the life.
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So, for example, if the pension was ₹6,000 and a person opted for commutation of pension then the commuted value, that he will get as lump sum will be 6000*⅓*100 equals to ₹2,00,000. The monthly pension will get reduced to two third that is 6000*⅔ equals to ₹4,000.