In a significant move, the central government has introduced key changes to pension rules that can result in employees of public sector undertakings losing out on retirement benefits if they get dismissed or removed from service due to misconduct.
A notification revising Rule 37 of the Central Civil Services (Pension) Rules, 2021, was issued by the Department of Pension and Pensioners’ Welfare, which comes under the Ministry of Personnel, Public Grievances & Pensions.
The latest changes, which came into effect from May 22, 2025, were notified through the Central Civil Services (Pension) Amendment Rules, 2025. This amends the existing Central Civil Services (Pension) Rules, 2021.
Notably, the final decision regarding dismissal or removal shall remain subject to review by the administrative ministry concerned.
What has changed?
The latest amendment applies to the Public Sector Undertaking (PSU) employees, previously absorbed from government service. From now onwards, such PSU employees will have to forfeit their entire retirement benefits if they are dismissed or removed due to misconduct. These benefits include the ones that have accrued during their earlier service.
The amended Rule 37(29C) says, “The dismissal or removal from service of the public sector undertaking of any employee after his absorption in such undertaking for any subsequent misconduct shall lead to forfeiture of the retirement benefits for the service rendered under the Government also and in the event of his dismissal or removal or retrenchment the decision of the undertaking shall be subject to review by the Ministry administratively concerned with the undertaking.”
What it matters?
Prior to this, PSU employees, once absorbed, remained protected from retirement benefit forfeiture due to any misconduct occurring after their absorption, regardless of any subsequent dismissal.
This means that the pension benefits of such people from earlier service used to remain protected even after dismissal. However, this has now been eliminated by the latest rule.
The new rules specify that the stipulations related to “pension and family pension subject to future good conduct” and “compassionate allowance” will now be applied to employees who have been dismissed or removed from service.
Who all are covered under this?
The amended rules will apply to all the government employees who have been appointed on or before December 31, 2003. However, this does not include:
1. Railway personnel
2. Casual and daily wage workers
3. Indian Administrative Service (IAS), Indian Police Service (IPS) and Indian Forest Service (IFoS) officers.
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