PSB pensions
From Indiapensions
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History
For a long time banks in India were covered only by the Contributory Provident Fund and Gratuity. A defined benefit pension scheme existed only in the State Bank Of India. The fact that some employees received pension benefits (for example employees in the State Bank of India) and the rest of the employees could never avail this facility became a major topic of concern. There ensued a series of negotiations and settlements between the Indian Banks Association and the Workmens' Union (which comprised mainly of All India Bank Employees Association), which resulted in the introduction of a pension scheme for all banks.
Eligibility
Pension scheme in public sector banks cover both full time employees and part time employees. (Part time employees are those who work for thirteen hours or more per week and have served for at least ten years). The following classes of employees are covered.
- Employees joining the bank on or after 1st November, 1993.
- Employees serving in the banks as on 31st October, 1993. These employees had the option of joining the scheme. In case an employee decided to do so, he had to transfer the bank's total contributions to the provident fund and the interest accrued thereon, to the pension fund.
- Employees retiring between 1st January, 1986 and 1st November, 1993. These employees could join the pension scheme by paying back the bank's total contributions to the provident fund and the interest accrued thereon, along with a simple interest of 6% per annum.
Operational Framework
Contributions
Old age income security in banks consists of a contributory provident fund and a defined benefit pension scheme. In case of the contributory provident fund, the bank contributes the same amount as the employee does towards the provident fund. This is 10% of the employee's pay. Pay includes the basic pay including stagnation increments, if any and all allowances counted for the purpose of making contributions to the provident fund and for the dearness allowance.
If an employee opted for the pension scheme, the ten percent contribution of the bank which was earlier made to his provident fund was transferred to the pension fund. This applied to all employees working in the banks in 1993 and was compulsory for all new employees recruited after 1993.
Benefits
There are two kinds of pension benefits- pension available to the employees and family pension for family members after the death of the employee. An employee needs to fulfill certain conditions to be eligible to receive pension. The formula for calculating pension is (half of the average emoluments X number of years of qualifying service)/33. The minimum amount of pension received is Rs.375 per month in case of a member who retired before 1st November, 1993.and Rs.720 per month for those retiring after 1st November, 1993.
A dearness relief is granted over and above the basic pension to allow for inflation. Dearness relief is granted on member's pension or family pension or invalid pension or on compassionate allowance. It is allowed on full basic pension even after commutation (withdrawal of one third of money from the basic pension).
Commutation of pension
The scheme allows a member to take a fraction of monthly pension as a lump-sum after retirement. This is known as commutation of pension. The maximum amount a member can take as a lump sum is 1/3rd of the basic pension admissible to him. A pensioner who has commuted a part of pension, shall receive only the balance of the pension on monthly basis. However the full value of the pension is restored after a period of 15 years from the date of commutation. The commutation is admissible in respect of superannuation pension, voluntary retirement pension, premature retirement pension, invalid pension and compassionate allowance. If a pensioner dies after the commutation has become payable, without receiving the commuted value, it will be paid to his/her nominees.
The maximum amount that can be taken as a lump sum is equal to basic pension X 1/3 X 12 X factor as per commutation Table. The factor in the commutation table that is applicable depends on the age of the member on the next birthday.
Commutation after one year from the date of retirement can only be sought after medical examination. If the application for commutation is made within one year after the date of retirement, no medical examination is required in cases of superannuation pension, premature retirement pension and pension on voluntary retirement. If application is made after one year of retirement, then it becomes essential to undergo medical examination. However in case of those who are granted invalid pension or compassionate allowance, a medical examination is essential even if one applies for commutation within one year of retirement.
Forfeiture of pension
The cases of dismissal, termination or resignation by an employee from the service would disentitle him from any pension benefit or payment. There could be exception only under the condition where the Service regulations or Service Rules or Settlements entitle such an employee to receive superannuation benefits.
An employee who is deemed to have retired voluntarily from the bank's service under the provisions for voluntary ceasation of employment contained in Bipartite Settlement dated 10th April, 1989, shall entail forfeiture of past service and would not qualify for pension.
Tax benefits
The pension that an employee receives after his retirement is subject to tax. However, the commuted amount upto one third of the pension is tax free.
Investment
Every bank has provision for the payment of pension or family pension to the employees or his family. In order to have such a provision, each bank constitutes its own fund, known as the Bank (Employees) Pension Fund. To ensure proper management, this fund is kept under a trust. This Trust has to be constituted within one hundred and twenty days from the notified date. It is important to have sufficient amount in the fund so that the trustees managing the Fund are able to meet the due payments and interests of the pensioners and beneficiaries. The Bank here, plays a vital role in contributing to the Fund. Each Fund (Trust) has books of accounts containing details of all the financial transactions relating to the Fund. The Trust also prepares the financial statements which specify the assets and liabilities. An account of the Financial statement is sent to the Bank on a periodic basis. For investigating into the financial condition of the Fund an actuarial valuation of the fund is carried out every financial year. All money contributed to the Fund has to be deposited in a Post Office Savings Bank Account in India or in a current account with any bank. The contributions are invested as per the notified investment pattern. These investment guidelines are meant for and followed by not only the pension scheme but also by the provident fund scheme. The investment pattern as envisaged in the above categories is achieved by the end of a financial year (that is,31st March of each year)30.
Administration
Every Fund is constituted in the form of a Trust. Every Bank is vested with the responsibility of appointing the Trustees who shall comply with the directions of the Bank for the proper administration and functioning of the Fund. One of the Trustees is the Chairman of the Board Of Trustees and in case the Chairman of the Trust is absent then the acting Chairman - another Trustee acting as an alternate Chairman takes the responsibility for Fund management. The pension fund in State Bank Of India, is administered by the Pension, Provident fund and Gratuity Department. The cost of the management of pension fund is borne by the bank itself and not by the trustees.
Grievances
The pension is paid to the retiree on a monthly basis. There may crop up a situation where the pension is not received in time. In such a case, the retiree can go to the senior authorities of the bank to complain about such a delay. In the State Bank Of India, the retiree(s) can go to the Trustees or Pension, Provident fund and Gratuity Department.
Transfer of job
There might arise a situation where an employee resigns from a bank before rendering or completing minimum number of years of service and joins another bank/service. In such a case, the employee would not be entitled to receive any pension from the former bank as this leads to the forfeiture of this service and hence pension. On the contrary, if he leaves the bank after completing the minimum years of service required for receiving pension and joins another bank or service, he would be entitled to receive the pension benefits from the former bank. In situation where an employee joins any other bank or service then, based on the number of years of service. rendered in the bank / service he joins, he would be entitled to the pension. The services rendered in the past or previous bank is not taken into account unless there is a case of merger of the banks.
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