Implications Of VII CPC Recommendations As Illustrated With Example Of Pensions Of Lt Col

{Update: The increment method originally recommended by 7 CPC was later changed by applying inter-CPC formulas for calculating "Notional Pay" of older retirees. Both methods did not co-relate the qualifying service of older retirees. The table in this blog post has been updated following amendments that were issued subsequently}

As mentioned in the previous blog-post, the grey areas regarding pension fixation for older retirees, as recommended by VII CPC, are best taken stock of in reference to actual examples.

Having touched on the vagueness surrounding pensions, as recommended for retirees in rank of Major, perhaps it is time to take a look at the other hapless category of armed forces retirees, the veteran Lt Cols.

It may be best to reproduce in enirety the recommendations of the pay commission regarding fixation of pensions as follows :

"10.2.87 The Commission recommends the following with regard to fixation of pension for past defence forces personnel retirees:

i. All the Defence Forces who retired prior to 01.01.2016 (expected date of implementation of the Seventh CPC recommendations) shall first 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 shall be added to the amount which is arrived at after notionally fitting him in the Seventh CPC matrix. Fifty percent of the total amount so arrived at shall be the revised pension.

ii. The second calculation to be carried out is as follows. The pension, as had been fixed at the time of implementation of the VI CPC recommendations, shall be multiplied by 2.57 to arrive at an alternate value for the revised pension.

iii. Pensioners shall be entitled to the higher of the two.

It is recognised that the fixation of the pension as per the above formulation (i) above may take a little time since the records of each pensioner will have to be checked to ascertain the number of increments earned in the retiring level. It is, therefore, recommended that in the first instance the pension, may be fixed in terms of formulation (ii) above, till final fixation of the pension under the Seventh CPC matrix is undertaken."

Let us ask some questions straight away:

• Why has VII CPC not addressed the issue of OROP in that brief paragraph?

• How has VII CPC spelt out the manner in which "equal service" for the same rank will be catered for in that matrix referred to in recommendations?

• Why are the two illustrations given in the CPC recommendations, following that para, only of those who retired in the VI CPC regime? What about retirees who retired in the V or IV or III CPC regimes? In those days, they did not have "pay-bands" or "grade pay" refereed to in VII CPC recommendations.

The answer to all these questions is, of course, that the blogger does not have the faintest idea.

Though the title of this blog post has a specific reference to retirees in the rank of Lt Col, some of the doubts raised are general in nature and serve to point to a lack of answers in the recommendations.

To start with, where the para of recommendations states, "All the Defence Forces who retired prior to 01.01.2016...", is it just possible it intends to mean "All personnel of defence forces who retired between 01 Jan 2006 and 31 Dec 2015 in the regime of VI CPC"?

That could make some sense because in the context of armed forces, the number of increments for the same years of service, pay-bands, grade pay are the same for respective ranks for both VI and VII CPCs as reflected in the matrix. The matrix is, more or less, consistent if one considers retirees who retired and will retire between 01 Jan 2006 and 31 Dec 2015.

Example:

Let us take the case of a Lt Col with, say 21 years of service, who retired on PMR on 30 Nov 2015. For the sake of simplicity, we can assume this Lt Col was promoted to the, now time-bound, rank of Lt Col on 01 July 2007 at a service of 13 years. That means he had 8 increments to his credit based on which, in the VII CPC matrix, his notional pay parity, in level 12A, would be 143500/- and his post VII CPC pension, inclusive of MSP would amount to 79500/-

Now consider the case of a Lt Col, also with 21 years of service who retired in the regime of V CPC on 31 October 2003 before, what some would term the infamous, date of implementation of phase-I recommendations of AVS Committee, viz 16 Dec 2004. Assuming, this second Lt Col had picked up his rank at a service of 18 years in July 2000, he would have "earned" three increments in the pay-scale applicable to his pay-scale rank at the time. This second Lt Col would then be placed in level 12 A of VII CPC matrix at the notional pay parity point of 123800/- which corresponds to a VII CPC pension (inclusive of MSP) amounting to 69650/-.

We see here the possibility of two pre 01 Jan 2016 veterans in the rank of Lt Col, with the same service of 21 years, being placed at two different pension levels post 01 Jan 2016 at pensions of 79500/- and 69650/-. Clearly, the recommendations and the matrix do not reveal the full story.

Increments Or 2.57X:

Another inference that can be drawn from the recommendations is that the pension arrived at as per para 10.2.87 sub-para (ii), i.e. by using a multiple of 2.57, yields a post 01 Jan 2016 pension of 26265 x 2.57 = 67501.05 for retirees in the rank of Lt Col. In the matrix, it corresponds to some point in between 1 and 2 increments which have pension values of 66100/- and 67850/- respectively in level 12 A. So, at first sight it appears any Lt Col veteran with more than one increment would need to have his pension fixed based on increments rather than the one arrived at with the multiple of 2.57.

OROP And The Matrix:

The scenario gets murkier if we bring in the element of OROP. Some behind the scenes tinkering seems to be presently underway for preparing tables of OROP pensions to be effective from 01 July 2014.

The powers that be alone know what they intend to unleash by way of what they would then term as OROP, but in specific reference to the VII CPC matrix, would the 2.57X multiplier be used on pension of 26265/- fixed by VI CPC for Lt Cols or used in conjunction with OROP pensions, presumably based on rank and years of service, expected to be thrown into the public domain shortly?

One of the aims of this blog-post is to underline the rather over-simplistic approach to illustrations in VII CPC recommendations referred to above. Some issues definitely arise when we shift to even a very simple example based on V CPC regime retirees as discussed in the preceding paragraphs.

It is also seen that the recommendations could raise lots of other questions in the context of OROP.

As an example, would the pensions of VI CPC retirees be first fixed as based on the 7 CPC matrix and pensions of V CPC and earlier regime Lt Col retirees then adjusted under OROP, based on equal service, with the pensions of VI CPC Lt Col retirees?

In the above example, the retiree under V CPC regime would then have his pension fixed at 79500/- and not 69650/-, as based on years of service and not increments earned for parity with a VI CPC retiree, the latter having his pension fixed on basis of increments as per the VII CPC matrix.

An Alternative:

This was suggested previously elsewhere. One other approach could be to review the term "increments earned" used in the above-mentioned para of VII CPC recommendations. 

The increments required to be considered would be those required to attain the actual years of service put in by a retiree when considered in the specific level of the matrix.

In the example of the Lt Col, considering that level 12A of the matrix starts at a service of 13 years, all previous Lt Col retirees with 21 years of service would need to have post 01 Jan 2016 pensions fixed at increment stage of 8 as 13+8=21.

The increment stage would need to apply to all past Lt Col retirees with 21 years of service for fixing their pensions and not the increments actually earned by them in the pay-scale of Lt Col. Those increments could have been as low as just 1 in the case of a Lt Col who had picked up the Lt Col rank at service of, say, 20 years in the regime of IV or V CPC and then taken PMR at 21 years of service.

A table could bring out the probable relationship between the increments earned component of the VII CPC Matrix vis-a-vis the number of years of service that these increments currently correspond to :

Pay Band	37400-67000
Grade Pay	8000
	Level 12A	Pension (Inclusive Of MSP 15500/-)	No. Of Years Of QS (Assuming Level 12-A starts at QS=13 years)
1	116700 121200	68350	13
2	120200 124800	70150	14
3	123800 128500	72000	15
4	127500 132400	73950	16
5	131300 136400	75950	17
6	135200 140500	78000	18
7	139300 144700	80100	19
8	143500 149000	82250	20
9	147800 153500	84500	21
10	152200 158100	86800	22
11	156800 162800	89150	23
12	161500 167700	91600	24
13	166300 172700	94100	25
14	171300 177900	96700	26
15	176400 183200	99350	27
16	181700 188700	102100	28
17	187200 194400	104950	29
18	192800 200200	107850	30
19	206200	110850	31
20	212400	113950	32

There will be additional complications when examples of retirees who retired in VI CPC regime but picked up their Lt Col ranks post AVS-I in V CPC regime.

The issue of Lt Cols who had retired with 26 years of service in V CPC regime prior to implementation of AVS-I will pose an additional twist to the complexity and needs to be dealt with separately.         

Some Speculations On The VII CPC Matrix With Examples Relating To Rank Of Major

This follows on the previous blog post as well as some comments on the Aerial View blog. (Links are at the end of this blog-post)

Some examples had been cited to see how the proposed matrix would affect pensions of pre 2016 and pre 2006 retirees.

Let us first take the case of retirees in Maj rank. We can assume a total qualifying service of 20 years.

It must be remembered that there was a time when Maj rank was obtained on completing 14 years of service. That was reduced to 11 years many years later. Now the rank of Major is obtained on completing 6 years of service.

So depending on when an older veteran with Major rank retired, the number of increments as Major could be 6 or 9 for reaching the service of 20 years as against 14 increments that would be currently required at level 11 of the matrix.

These increments correspond to pay points of 80400, 87900 and 101900 respectively as shown highlighted in the matrix.

Clearly, if the OROP principle of equal service in rank is to be applied, under 7 CPC, an older Maj retiree with 20 years would need to have his pension placed at par with that of a Major retiring in and after Jan 2016 with the same service of 20 years.

As per the matrix, the Major retiring in 2016 and later with 20 years of service would have 14 increments to his credit. That is where the notional pay point, hence the pension level, of the older retirees should be and not the one determined by the lower number of increments they had actually earned in the past for the same service of 20 years.

Service At Promotion To Major Rank	Increments In Current 7 CPC Matrix Level 11 For A Qualifying Service of 20 Years	Notional pay Point In 7 CPC Matrix Level 11 For A Qualifying Service of 20 Years	Pension Parity Points Inclusive Of MSP Of 15500 For A Qualifying Service of 20 Years
14	6	80400	47950
11	9	87900	51700
6 (Current)	14	101900	58700

The above table summarises the considerations as applicable to a Major retiree with 20 years of service if just the level applicable to Major is considered.

But considering that nowadays all Officers are minimally Lt Col at a service of 20 years with 7 increments (13+7=20), the notional pay parity point for an older Major retiree should be with that of a Lt Col with 7 increments at level 12A i.e. 139300. That corresponds to a 7 CPC pension of 77400. 

More on the subject in relation to the rank of Lt Col, a bit later.
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Links To Connected Material :

Previous Blog post : http://goo.gl/5RUq2x

Discussion On Aerial View Blog : http://goo.gl/zOrcA9