Banking on easy pension withdrawal

The RBI’s master circular seeks to make transactions smooth for seniors

For senior citizens who have retired from the Central/State government service and receive pension, organisations and banks work to make the process comfortable. Even so, the banking regulator RBI has come out with a master circular recently (July 2018), which instructs banks to make it easy and simple for the elderly to draw pension.

The directives give greater clarity on aspects such as having a joint account for receiving pension, prompt payment of dearness relief, nomination for receiving arrears in case of death, submission of life certificate and withdrawal modes for sick/disabled persons.

If you are a pensioner or assisting an elderly relative or parent to withdraw pension every month, you need to be aware of these updated instructions.

Pension in joint account

Many State and Central government departments credit pension to joint accounts. However, the joint account must be opened by a pensioner only with his/her spouse as a joint holder.

A joint account can be operated by a retired person with his/her spouse, whom he authorises for family pension in the Pension Payment Order (PPO) in case of his/her death (main pensioner).

The RBI circular makes it clear that these joint accounts can be operated as a ‘either or survivor’ or ‘former or survivor’ basis.

This move would greatly benefit the elderly, as both spouses would be able to withdraw amounts, more so if the pensioner is sick or immobile.

The banking regulator’s instructions also make it clear that in case of death of the pensioner, the bank cannot ask the surviving spouse to open a new account for the purpose of receiving family pension. The same account can continue to be used.

Now, governments tend to come up with pay commissions periodically, which hike the salaries for those serving and the pension for retirees. These additional payments are made with a lag from the time of announcement of revised salaries and pensions.

In case a pensioner dies in the intervening period, the arrears can be paid to the nominee or to the surviving spouse if he/she is a second holder in the joint account.

All pension-paying bank branches have been instructed to accept nomination forms — ‘A’ for adding a nominee and ‘B’ for changing an existing nominee.

Updating pension details

The PPO number in the pension passbook issued by the respective government agency is important for the retirees, as it has all details of the amounts payable after retirement; the person who would be the recipient of the pension after the death of the pensioner and other personal information. In case the PPO papers are lost, it becomes quite challenging for the elderly to obtain duplicates.

Also, transferring a pension account to another bank or branch would be difficult, without these details. The RBI has now advised banks to update the PPO number in the bank passbook itself. This move would help avoid unnecessary hassles for the senior citizens.

Banks have also been instructed to issue pension slips and provide details of increase in basic pay or dearness allowance (DA) announced by governments at regular intervals. Higher pension, starting from an additional 20 per cent of the revised basic, is paid to government service retirees who are more than 80 years old and the amounts are progressively increased in slabs according to the age. For such pensioners, it would be a welcome move to have pension slips so that they can check if the additional pension sanctioned is correctly credited to their accounts.

Operational ease

All pensioners and family pensioners need to submit a life certificate, usually by November 30 every year. Though some opt for Aadhaar-based biometric authentication that is a form of digital life certificate, some others submit the form physically to the pension-paying bank or the respective department. There are instances of banks misplacing the physical certificates, resulting in pensions being held back, which can have severe financial implications for senior citizens.

The RBI has directed banks to mandatorily issue acknowledgements during the receipt of life certificates.

Banks have also been advised to consider entering the receipt of life certificates in their CBS (core banking system) and issuing a system-generated acknowledgement. As a result, the receipt of documents would be acknowledged and records updated in real time.

Finally, for pensioners who are immobile or very sick and generally too old to physically withdraw pension from their banks, the thumb or toe impressions — attested by two witnesses known to the bank, one of whom should be a responsible bank official — can be made in the cheque instead. If even this is not possible, a mark that is identified by two independent witnesses should be made on the cheque.

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