sunil_prem at November 7th, 2014 08:02 — #1
Everyone retires - even die-hard faujis hang-up their uniforms one day. Life doesn't however end there. Beyond lie many years that could be the best in our lives, if we ensure two basics - our health and our finances.
Here are a few guidelines as to how much we may expect to receive when we shed our uniforms.
The Services look after us quite well financially and with a dint of planning the amount we receive ensures that we can lead comfortable lifestyle even after retirement. On retirement, servicemen would receive the following entitlements :
(a) Monthly Pension (Full/ Commuted Pension depending on what is chosen.
It is recommended to commute the pension)
(b) As Lump Sum:
- Commuted amounted of Pension
- Retirement Gratuity
- Leave Encashment
- DSOP Amount
- AGIF Subscription
Monthly Pension A serviceman receives 50% of his pay as pension but with DA thrown in the amount increases considerably. Calculating the pension is easy. It is 50% of your total Monthly pay plus DA (Example : An Officer retired from the post of Col on the attaining of age (Full service) and his basic pay if Rs. 60000.00 Grade Pay 8000, Military Service Pay 6000/. The above example will be used for calculation.)
- Basic Pay (i.e 60,000/) + Grade Pay (8000/) + MSP (6000/) = 74000/ .
Pension is 50% of this amount i.e 37,000/
- Add DA. It is presently 107%
- Total Pension. We will thus get 37,000/ + 39570/ (107% of 37,000/) = 76,590/
- If you commute your pension you will get 50% of the pension amount +
DA on full pension. The total pension amount per month is now Rs.
18500 + 39,590.00 = 58,090.00
Commutation of Pension: It is recommended that you commute 50% of your pension. This will give you a bulk amount on retirement which more than makes up for receiving a 50% less monthly pension. After 15 years from your date of retirement you will again receive full pension.
Commutation amount to be received can be calculated by this basic formula = 50% of Basic pension (18,500/) x Commutation Value (8.5)* x 12
*(The commutation value varies between 8.1 to 8.99 depending on your age at the time of retirement. Most of us will get a value of 8.5) = Rs. 18,500 x 8.5 x 12 = 18, 87000/ (Eighteen Lakhs and Eighty Seven Thousand Only)
Gratuity: We will receive retirement gratuity which can be calculated by the formula:
(Number of Years of Service ) / 2 X Basic Pay + Grade Pay + MSP + DA
However there is a catch. The maximum ceiling of Gratuity is Rs. 10,00,000/ (Rs Ten Lakh Only) Most of us will receive this amount.
Leave Encashment: We can encash a maximum of 300 days (10 Months) while in service. (Strongly recommended to be done) This simple formula will help work out how much we receive
Leave Encashment = Basic Pay + Grade Pay + MSP + DA x 10 months
Ie : 60,000.00 + 8,000.00 + 6,000.00 = 74,000 + DA 107% 79,180 = 1,53,180 x 10 = 15,31,800.00 (Approx Rs 15 Lakhs)
DSOP/ PP Fund amount. This will vary from individual to individual and depends on how wisely he has invested in DSOP/PP over the years
AGIF Subscription. This will vary as per the subscription paid by the officer/PBOR and the duration of service. With the present rate of Rs 5000/ for officer and 2500/ for PBOR per month we can expect around 5-7 Lakhs for PBOR and 10-14 Lakhs for officers. The refund amount can be seen in Table chart issued by AGIF Office on yearly basis.
In All, How Much will we Get?
A Col with around 28 years service can thus expect to get Rs 40-45 Lakhs(excluding DSOP) and a PBOR around 14- 18 Lakhs. This will come as a lump sum when we retire. Remember – THIS AMOUNT IS NOT TAXABLE which is a huge bonus for us all.
In addition we will receive a monthly pension of around 45-50000/ for officers and around 12- 16000/ for PBOR. This is of course based on the Sixth Pay Commission and should increase for us all if OROP and the Seventh Pay Commission comes about.
The simplest, no frills formula, is to use the pension for monthly expenses. Keep the lump sum received in safe investments and try not to touch the corpus amount – in fact build up on the corpus with time. Use the interest (On Rs 40 Lakhs we will get Rs 26000/ per month just as interest either for expenses or to be ploughed back in to the corpus).
Others who are financially wiser, may follow other investment options. However, please remember:
- There are no magic formulae for doubling your money overnight. Even the wisest of investors would be thrilled with a steady 15 - 25% return year on year!
- Lastly, 'A fool and his money are soon parted!
Our retirement perks are quite good, especially if you have no liabilities. So, enjoy your Golden years and make the best of what they have to offer by looking for a second career and pursuing a second calling. You already possess financial stability. So make sure that the calling you choose will be one that you truly enjoy.
vasantnaik at November 10th, 2014 03:47 — #2
Thank you for putting it across simply. But the figures you have given are applicable to Officers affected by the Sixth Pay Commission. Those, like me who retired earlier, get a much lesser amount since our basic pay was so much lower in those times.
Which brings me to my moot point. When is the One Rank One Pension likely to come about? That will bring all ex-servicemen on the same scale.
rajbalwada at January 18th, 2015 01:05 — #3
Only Sunil Prem, my course mate could have done something like this.
Very aptly compiled version applicable to all of us.
Hi bro well done and keep it up!!
ajay_chauhan69 at February 2nd, 2015 07:50 — #4
As usual you have made it as simple as you always done. Seems great. Warm regards, Ajay Chauhan
naresh at July 3rd, 2015 22:18 — #5
thanks.This is the first time I have understood.
sunil_prem at July 4th, 2015 13:18 — #6
Glad this could be of some use :-)
livelifefully at August 19th, 2015 09:02 — #7
In case you are retiring at 54 years or above,and children and/or spouse working,its my personal opinion...plz don't go in for commutation of pension. More so ,if as Co/Brigl you are seeking re-employment....don't commute 50% pension.Secondly,FDs in Banks don't off-set inflation.Thirdly,for gallantry awardees...your pension is tax free...and try and invest maximum,not all liquid cash in 3 year lock-in period of Tax saving mutual funds...TRIPLE E..... EEE...that is INCOME Invested is EXEMPT from tax,Interest earned is exempt,and on exit after 3 years redemption amount is exempt.Fourthly,Your aim should be to earn yearly interest upto 2.5 lacs which is INCOME TAX FREE limit as of now...after 60 years as senior citezen this limit increase...so increase your interest earned component accordingly.
anna1028 at September 3rd, 2016 01:54 — #9
manoj at August 30th, 2017 03:32 — #10
This is so lucid , I got to know very first tym , this counts a lot , I m sure , Thanks ..With regards
rathiraj at November 23rd, 2017 00:55 — #11
Thanks for the info, after retirement in Sep 2017, I have recd DSOPF, AGIF & Lve Encashment. Now I have also finished the necessary docu with the bank wrt PPO.
I want to know when :-
1. I would get my Gratuity and Commutation (I have commutated 50%) amounts.
2. Since Oct 2017 the retirees are getting emoluments as per 7th CPC, by when we too will get the same as arrears?
9935900597 at May 6th, 2018 07:22 — #12
Thank you very much for posting valuable information. After 7th cpc CDA(AF) started objecting the payment of MSP with leave Encashment at the time of retirement. This is because as per the decision of govt. rate of Military Service Pay (MSP) is accepted. However, MSP will be
counted only for Dearness Allowance (DA) and Pension.