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The government amended pension rules for PSU employees, effective May 22, 2025. Dismissed PSU employees for misconduct may lose their entire pension, including prior benefits.
The revised pension rules do not apply to railway employees, casual and daily wage workers, and IAS, IPS, and Indian Forest Service (IFoS) officers.
In a major policy shift, the central government has amended pension rules that could significantly affect public sector employees — particularly those who transitioned from government departments to Public Sector Undertakings (PSUs). The changes, effective from May 22, 2025, were introduced through the Central Civil Services (Pension) Amendment Rules, 2025, modifying the Central Civil Services (Pension) Rules, 2021.
What Has Changed?
Under the new provision, Rule 37(29C), if a PSU employee, originally absorbed from a government service, is dismissed or removed due to misconduct, they may forfeit their entire retirement benefits, including the pension earned during their earlier government service.
This is a significant departure from the earlier framework, where dismissal from a PSU did not impact pension benefits accrued during government tenure.
Key Highlights of the New Pension Rules:
Full Forfeiture Possible: Dismissed PSU employees can now lose both their PSU pension and their prior government-earned pension.
Applies Only to Misconduct: The penalty applies in cases of dismissal or removal due to disciplinary reasons.
Review Mechanism Added: Such decisions won’t be automatic or final. The concerned administrative ministry will review the dismissal or removal before pension is forfeited.
Conditional Relief Available: Two conditional provisions may still be considered on a case-by-case basis:
Pension subject to future good conduct
Compassionate allowance, in line with government rules
Who Is Covered?
The new rules apply to:
- Government employees appointed on or before December 31, 2003
- Employees permanently absorbed into a PSU from government service
However, these do not apply to:
- Railway employees
- Casual and daily wage workers
- IAS, IPS, and Indian Forest Service (IFoS) officers
Why This Matters
The amendment is likely to enhance accountability and discipline within PSUs, signalling that misconduct can have lasting financial consequences, even after leaving direct government service.
According to experts, this change could foster a more disciplined environment within PSUs, but it also elevates the stakes for employees facing disciplinary actions long after their time in government service.
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