How much will the monthly pension of retired employees increase? Know this update 

Lately, there’s been a lot of buzz about the 8th Pay Commission. The Government of India gave it the green light last week, and it’s set to kick in on January 1, 2026. This has got government employees and pensioners pretty excited! Over 1 crore people will see the benefits from this change. Not only will employees get a pay bump, but pensioners will also feel a significant relief.

Big boost for pensions!

The Controller of Communication Accounts has set the minimum pension for retirees at Rs 9,000 a month. Just to give you some context, the fitment factor in the Seventh Pay Commission was 2.57, but there’s talk of raising it to 2.86 in the Eighth Pay Commission. If that happens, the minimum pension could jump to Rs 25,740 a month, which is a whopping 186% increase!

What’s the deal with dearness allowance?

Pensioners receive Dearness Relief (DR) to help them cope with inflation, which is currently pegged at 53% of the basic pension. This rate gets updated twice a year, on January 1 and July 1, based on the Consumer Price Index (CPI). For instance, if a pensioner’s basic pension is Rs 10,000, adding the DR would bring it up to Rs 15,300.

When the 8th Pay Commission is put into effect and the updated salary and pension payments begin, will the dearness allowance remain in place or be set to zero? Discussions suggest that if the 8th Pay Commission’s recommendations are enacted before January 2026, the current dearness allowance at that time will be incorporated into the basic salary, with a new dearness allowance starting from zero.

What comes next?

The dearness allowance is anticipated to rise two more times, in January 2025 and July 2025. Since the next pay commission is set to take effect in January 2026, it’s probable that the dearness allowance will be combined with the basic salary then.

However, if there are delays in its implementation, the government might announce an additional increase in the dearness allowance, which would then be added to the basic salary, providing retroactive adjustments for employees and pensioners.