Family Pension

Financial stability is a key objective for most individuals. Many times, people build this security gradually by investing in different financial products that can support their needs in later years.
 

However, considering the protection aspect of financial planning is just as crucial. Employers frequently provide financial rewards to employees in the event of an unexpected death. These provisions, which are sometimes neglected, can have a significant impact on a family during a difficult time.
 

These benefits work together to reduce financial uncertainty. A family pension, basically, is one such support mechanism. When the principal earner passes away, it helps dependants manage necessary expenses by giving them regular cash support. Here's a closer look at how it functions and what it usually covers.

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 pensions to widowers 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 tax¹-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 family pensions to the children in 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.

Difference between pension and family pension

A regular pension supports the individual after retirement, while a family pension steps in after the individual’s demise. People often use these terms interchangeably, but they serve different purposes and apply in different situations.
 

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 half 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 guaranteed³ returns on maturity to help finance your money goals after retirement while securing your family.