Family Pension - Meaning, Types and How it's work

What is Family Pension?

Individuals invest in a savings account and in various schemes for a pension because they want to have financial stability after retirement. The family pension is a part of the benefits given to an employee, and it is designed for them to achieve their financial goals. The employees who have joined the pensionable establishment on or before 31st December 2003 will get the pension benefits.

Types of Family Pension

The family pension is divided according to how the family wants to avail themselves of the benefit of the pension. To make the most out of it, you need to have detailed information about the family pension. There are two types of family pension:

1. Commuted Pension: If a family opted for the commuted pension, then they can receive the benefits in a lump sum. They can opt for this lump-sum amount when they need it for a large expense, such as paying off debts, etc. The specifics of this pension depend on the family pension rules.
2. Uncommuted Pension: If a family opted for an uncommuted pension, then it would create a regular income source for them. It provides the beneficiary with a monthly pension, which gives stability to the family in the long term. The whole pension is converted into monthly payments, subject to the rules of the family pension.

How Does a Family Pension Work?

According to the family pension rules, the amount of the fixed pension is decided as per the salary drawn by the employee at the time of his service. Here, salary means the basic pay.

If the employee of the government dies while in service, then his/her family is given 50% of the salary as a pension for 10 years. After that, they are given 30% of their last drawn basic salary.

In case of the death of the pensioner, then the family will receive the pension at the enhanced rate of 50% of the last basic pay for the first 7 years, and then it will be given at the rate of 30%.