The central government has taken a significant step forward to ensure fairness for employees retiring just before their annual increment dates. In a move following the Supreme Court’s directive, a new rule ensures that central government employees who retire on June 30 or December 31 — just a day before their scheduled increment — will now be eligible to receive a notional increment for the purpose of calculating their pension.
Supreme Court Ruling: Key Driver Behind the New Pension Norms
The Ministry of Personnel, Public Grievances and Pensions issued an official order based on the Supreme Court’s judgment dated February 20, 2025. According to the order, the eligible retirees will be granted a notional increment on July 1 or January 1, depending on their applicable increment date.
“The increment will be considered solely for computing pension benefits and not for other financial advantages,” the ministry clarified.
This change will impact many government employees who retire just before becoming eligible for an annual increment, ensuring that they are not financially penalized for the timing of their retirement.
Eligibility Criteria for Notional Increment
To qualify for this notional increment benefit, employees must meet the following conditions:
- Must retire on June 30 or December 31, a day before the annual increment date.
- Must have rendered the qualifying years of service required under pension rules.
- Must have a record of satisfactory work and good conduct.
Increment Dates and Their Role in Pension Calculation
Central government employees have the option to choose either January 1 or July 1 as their annual increment date. Previously, those retiring just one day prior to these dates were excluded from the annual hike, affecting their pension calculations significantly. With the new ruling, the increment will now be recognized notionally—not paid in cash, but used for pension calculation purposes only.
This change is seen as a correction of a long-standing anomaly in government service rules, offering relief to many pensioners.
Scope of the Notional Increment: Pension Only
It’s important to clarify that the notional increment:
- Will only be counted for pension computation
- Will not be considered for calculating gratuity or other retirement benefits
This distinction is based on the Supreme Court’s specific instructions, which aim to balance fairness with fiscal responsibility.
One-Time Increment for Retirements After May 1, 2023
In alignment with a separate Supreme Court ruling, the order also states:
“One additional increment will be payable to central government employees retiring on or after May 1, 2023.”
However, this provision does not apply retroactively. Those who retired before this date will not receive enhanced pension or arrears for the prior period.
No Enhanced Pension for Retirements Before April 30, 2023
The new rules make it clear that enhanced pension benefits linked to notional increment will not be applied to service periods before April 30, 2023. This decision aligns with the court’s stance to limit retroactive financial liability while still offering fair relief to current and future retirees.
All India NPS Employees Federation Welcomes the Decision
The All India NPS Employees Federation, which actively campaigns for the rights of both central and state government employees, hailed the move as a major win. Federation President Manjeet Singh Patel expressed gratitude to the Centre for acting swiftly on the Supreme Court’s ruling.
He also urged the government to extend this benefit to employees under the National Pension System (NPS) who choose to opt into the unified pension scheme.
Impact on Over 48 Lakh Central Government Employees
With over 48.66 lakh central government employees currently in service, this ruling has far-reaching implications. Many retirees who narrowly missed their increment due to the retirement date now stand to receive higher pension payouts, easing their post-retirement life.
What is Notional Increment?
The term “notional increment” refers to an increment that is considered for accounting or calculation purposes but is not actually disbursed as salary. In this context, it is only used to calculate the pension, offering indirect financial relief to retirees who served diligently until the end of their tenure.
Summary: Key Takeaways for Government Pensioners
| Criteria | Details |
|---|---|
| Eligible Retirees | Retired on June 30 or December 31 |
| Increment Dates Considered | January 1 / July 1 |
| Purpose of Notional Increment | Pension calculation only |
| Not Applicable For | Gratuity or other benefits |
| Effective From | May 1, 2023 |
| Retroactive Benefits | Not applicable before April 30, 2023 |
Read also: Jammu & Kashmir Elderline Helpline to Support Senior Citizens
Recommendations by Employee Unions
Employee unions and federations are also pushing for:
- Extension of this benefit to NPS-covered employees
- Unified pension scheme benefits for all government employees
- Consideration of similar relief for other categories like defense and railway staff
This decision marks a progressive shift in pension policy, addressing a long-standing issue that impacted thousands of retiring employees. By allowing a notional increment for pension calculation, the government ensures that employees aren’t penalized due to technical cut-off dates.
As the landscape of pension reforms evolves, stakeholders hope this ruling will pave the way for more equitable treatment of retirees across all government sectors.
