How to Calculate Commutation of Pension?

Pension commutation is a financial option available to pension holders that allows them to exchange a portion of their regular pension payments for a lump sum payment. In other words, it's the process of converting a part of your future pension income into an immediate, one-time payment. The pension commutation formula is commutation amount x  commutation factor x  12.

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Is there any commutation of pension calculator?

If you want to calculate the commutation of pensions, you can take this as an example:

• Lump Sum = 40% of Pension x Commutation Factor

For instance, if a pension holder has a monthly pension of ₹20,000 and the commutation factor at their age is 9.155, the calculation would be:

• Lump Sum = 40% of ₹20,000 x 9.155 = ₹7,322

Therefore, the pension holder would receive a lump sum payment of ₹7,322, while their monthly pension would be recalculated based on the reduced amount after commutation. It's crucial to understand the implications before making a decision and to consult official resources or financial experts for accurate and up-to-date information.

I suggest you do the calculation using the online calculator available on the pension portal as a lot of data needs to be provided for it. Here is the link:

So calculate the commutation of pension easily now.

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Every retiree came across the term CVP or the Commutation of pension. Choosing between current demands and future financial security is what a commuted pension is all about. It's better to understand how commuted value affects the pension before making a claim regarding it. For that, you should know how to calculate commutation of pension. You can do CVP calculation using a simple formula that I added below for you.

How to Calculate Commuted Pension Value?

Commutation of pension allows a pensioner to receive a lump sum amount for a reduced monthly pension. In India, the maximum commutable portion is 40% of the basic pension, and the commutation factor is based on the pensioner’s age at retirement.

Here is the formula for pension commutation calculation:

Commuted Value = Commutable Portion×12×Commutation Factor

Where:

1. Commutable Portion = 40% of Basic Pension

2. Commutation Factor (varies by age, as per government tables)

3. 12 (represents annual pension months)

Let’s understand this with an example. Assume a basic pension of Rs.50,000 per month and retirement age of 60 years.

1. Commutable Portion = 40% of Rs.50,000 = Rs.20,000

2. Commutation Factor (Age 60) = 8.194

3. Commuted Value = Rs.20,000 × 12 × 8.194 = Rs.19,66,560

After commutation, the monthly pension reduces by Rs.20,000, leaving Rs.30,000. The pension is restored after 15 years from the commutation date. This is how is pension commutation calculated.

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How to Transfer Pension Contribution in EPF Online 

Before telling you how to calculate commutation of pension, I will share with you what is the commutation of pension. Both employer and employee contribute to an annuity fund which helps a person after retirement. But the lump sum amount you receive after your retirement is known as commutation of pension. So, how to calculate commuted value of pension.

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Although commutation of pension is a tricky process there is a formula to know the amount. Let us know the calculation of commutation of pension.

How to calculate commutation of pension?

Commutation value of pension is=  The Amount of pension to be commuted X 12 X purchase value for age next birthday.

I will share with you an example so that you can understand it better.

I hope you know how to calculate commutation of pension now.

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