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What is a Family Pension? A Complete Guide

02-08-2022 |

Financial stability is an important money goal for every individual. They invest in different financial products to help sustain their financial requirements at an older age. On the other hand, employers take responsibility for providing a financial benefit to the family in case of the unexpected demise of their employees. Every benefit put together can secure the family's future in any scenario. And a family pension is one such instrument that seems to benefit the family at large in the absence of the family's sole earning member. Here is a detail about it.


 

What is a Family Pension?

The family pension is a financial benefit provided to the family of a government employee if the employee dies while still in service. The government will provide the pension to the widow or widower. And, in case the widow or the widower is not present, the pension is offered to the children.

 

To avail the benefit, the government employee should have become a part of the pensionable establishment on or before 1st January 1964. And the date of joining should be on or before 31st December 2003.

 

The family pension is calculated at 30% of the basic pay. And, it shall be subject to a minimum of ₹3500 per month and a maximum of 30% of the highest salary received.


 

Types of Family Pension

There are two types of pensions.

  • Commuted pension - The pension is paid to the family member as a lump sum and is not taxable*.
  • Uncommuted pension - The pension is paid to the family member as a regular monthly income. It is tax*-exempt upto ₹15,000 or 1/3rd of the pension, whichever is less.


 
Eligibility Criteria for the Family Pension Scheme

 

The government employee should decide who will receive the pension after their death. However, as they are not contributing to the fund, they will not have control over the pension amount provided to their family. Here are a few rules regarding the eligibility criteria.


 

Eligibility criteria for the spouse
 
  • A family pension is provided to the widow or widower until their death or re-marriage, whichever occurs earlier.
 
  • The widow or widower can continue receiving the pension on re-marriage if they don't have a child and the income from all other sources is less than the minimum family pension.


 
Eligibility criteria for children
 
  • The government will provide the family pension to the children in the order of their birth. The youngest will be eligible only when the eldest or above them become ineligible for receiving the benefit.
  • In the case of providing the pension to the child, the pension becomes payable until they get married, turn 25 or start earning, whichever is earlier.
  • In the case of pension payable to the twins, the benefit will be paid to them equally.
  • Any adopted child by the widow or widower cannot be treated as a family member.
  • If both the husband and wife are eligible for the family pension scheme, the child or children will be payable for the family pension.
  • If the family pension is payable to a widowed/unmarried/ divorced daughter, she should be paid until she gets remarried or married or begins earning her own livelihood, whichever is earlier.
  • If the family member receiving the pension is a child who is disabled and can't earn, they can receive the pension until death. If the child is a minor, then the legal guardian will receive the pension on their behalf.


 
How Can the Family Receive The Family Pension After Death Of The Pensioner?

 

Claiming the pension benefits after the death of the pensioner is a simple process.

 

  • The claimant will have to reach out to the pension paying bank and provide the death certificate and the half portion of the pensioner's PPO (Pension Payment Order).
  • If the pensioner does not have an account in the bank, a new account needs to be opened. On the other hand, if it is a joint account with the spouse, they can submit the death certificate and an application to activate the pension scheme.
  • The claimant must provide the necessary identity proof and residence proof to process the pension plan.
  • The bank will update its system with the pensioner's date of death and activate the pension scheme.
  • The bank will return the half portion of the pensioner's PPO and start crediting the pension to the family member's account.


 
How is Family Pension Different from a Retirement Plan?

 

A family member will receive the family pension after the death of the pensioner. On the other hand, the person investing in the pension plan will receive the pension on retirement when the plan matures or is deferred to a later date based on the policy conditions.

 

For instance, when you invest in  Tata AIA retirement policy, you can choose between the immediate and the deferred annuity plan. The immediate annuity plan starts paying the pension from the date when the plan matures, and the deferred annuity plan will start paying the pension from a later date based on your priority.

 

Retirement planning is important to secure funds for the future and live your retirement life in peace. We also offer retirement solutions with a life cover and guaranteed1 returns on maturity to help finance your money goals after retirement while securing your family.


 

Conclusion


Financial security is important for a family to survive without the presence of the sole earning member. Therefore, the government introduced a family pension scheme to help the family of a deceased pensioner. The scheme will provide a pension to the employee's family who meets with an unexpected death while still in service. It is a great way to reduce the financial burden during a crisis.

 

While a family pension scheme can secure the family, a retirement pension plan can help people manage their finances to secure their retirement life by saving for medical and other expenses. The options to invest are plentiful. Choosing the one that suits your financial needs and income will be a smart decision! 

 

L&C/Advt/2022/Jul/1711

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimers

  • Insurance cover is available under the product.
  •  The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
  • 1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry