Pension New Rule: The central government has made an important decision that gives relief to employees retiring on 30 June or 31 December — just a day before the annual salary increment.
These employees will now get a notional increment to ensure proper calculation of their pension. Earlier, many employees missed this benefit due to a one-day gap.
Although the increment won’t be paid in actual salary, it will help increase the pension amount, which is crucial after retirement.
What is a Notional Increment?
A notional increment means the salary increase that an employee would have received one day after retirement is added only for pension calculation.
This is not a real increase in salary and will not be counted for any other financial benefits.
What Was Happening Before?
In 2006, the government set a common increment date of 1 July every year. Later, in 2016, two dates were fixed — 1 January and 1 July.
Because of this, employees retiring on 30 June or 31 December missed the increment, which reduced their pension amount.
In 2017, the Madras High Court ruled in favor of giving a notional increment to a retired employee. The Supreme Court later supported this decision in similar cases in 2023 and 2024.
What Has Changed Now?
On 20 May 2025, the Department of Personnel and Training (DoPT) issued an office memorandum confirming that this benefit will now be given to all eligible central government employees, as long as they have completed their required service satisfactorily.
What Should You Keep in Mind?
The notional increment will be used only to calculate the monthly pension. It won’t apply to other retirement benefits like gratuity, leave encashment, or pension commutation.
For example, if an employee’s salary was ₹79,000 on 30 June and they were due for a ₹2,000 increment on 1 July, their pension will now be based on ₹81,000.
