The government has made a significant change to pension rules, offering relief to thousands of employees retiring just one day before the scheduled salary increment. According to the new rule, employees retiring on June 30 or December 31 will now be eligible for a notional increment, which will be considered when calculating their pension.
How Pension Will Now Be Calculated
This change benefits those who previously missed the increment due to retiring just before it took effect. Normally, increments are added on July 1 or January 1, and they play a key role in calculating pension. With this rule, employees retiring right before these dates will still get the increment benefit added to their pension base. This will increase both their lump sum retirement amount and monthly pension.
Supreme Court Approval
The government had originally fixed July 1 as the uniform date for annual increments in 2006, later adding January 1 in 2016. However, employees retiring on June 30 or December 31 missed the increment and suffered reduced pension benefits. In 2017, the Madras High Court ruled in favour of granting a notional increment, and in 2023 and 2024, the Supreme Court upheld this right.
Also Read- Registration with DPCC Now Mandatory Before Constructing or Demolishing a House- Know the New Rule
Important Points to Remember
The Department of Personnel and Training (DoPT) issued an official memorandum on May 20, 2025, clarifying that all eligible central government employees will receive this benefit—provided they have completed their service properly.
However:
- Notional increment will apply only for monthly pension calculations.
- It will not affect other retirement benefits such as gratuity, leave encashment, or pension commutation.
For example, if an employee’s salary was ₹79,000 on June 30 and a ₹2,000 increment was due from July 1, their pension will now be calculated based on the updated ₹81,000 salary.