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The Union cabinet is set to approve next week a new Rs 5,000-crore pension formula that is expected to benefit more than five million central government employees.
Official sources told HT the new formula will calculate pension based on the latest drawn salary for a particular post.
"If a person retired as a director under the sixth pay commission, ten years later his pension would be fixed (based on) the salary of a director in the seventh pay commission," explained a senior government official.
"The new pension scheme will be put up to cabinet for approval next week."
The new method was fixed by an empowered committee of secretaries



(Ecos) headed by secretary (pensions).
The seventh pay commission recommended that pension could be calculated by two methods: One, pension would be 50% of the last salary and multiplied by 2.57. The second was an incremental method where pension was fixed at the last salary drawn with adjustments of increments drawn in that particular pay band.
The incremental method was found to have lacunae as 20% of records were found to be missing in various government departments, and officials felt this could lead to litigation in future.
"To avoid legal hurdles, the Ecos came up with the pay fixation method," explained the senior official.

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