Sometime back there was a message floating that Govt is cheating pensioners who commute pension. So I have done my own analysis and concluded that A Colonel retiring at 54 yrs and Commuting 50% pension on Basic Pay of 2,15,900/- is akin to taking a personal loan at *8.18% ROI* . So, nothing alarming as being made out but certainly govt must reduce ROI and bring it at par with long term inflation rate of 7%. Calculations below:-
1. BP- 215900
2. MSP- 15,500
3. Total- 231400
4. Pension excl DA (50% of Ser 3)- 115700
5. 50% Commuted amt- 115700/2= 57850
6. Commuted value= 57850x12x8.627= 59,88,863.4
*8.627 is commutation factor
Now consider this advance of Rs 59,88,863.4 as a personal loan given to you by Govt which has to be repaid in 180 months at an EMI of Rs 57,850/-. The RoI of this whole gamut works out to 8.18%.
If govt decides to reduce it to 7% then number of EMIs will come down to 160 ie 13 yrs and 4 mths. The Honourable Punjab and Haryana High Court in a particular case has brought it down to 13 yrs which is a welcome step. Anything below 13 yrs is a welcome move.