The Centre has amended pension rules to deny retirement benefits to PSU employees dismissed for misconduct, aiming to boost accountability and curb corruption.
New Delhi: In a significant policy update affecting lakhs of central government employees, the Union Government has announced a major amendment to the pension rules under the Central Civil Services (Pension) Rules, 2021. As per the new rules, employees of Public Sector Undertakings (PSUs) who are dismissed or removed from service will no longer be entitled to retirement benefits, including pensions.
The changes have been formalised through the Central Civil Services (Pension) Amendment Rules, 2025, which were officially notified on May 22. The revised rules clarify that in cases of dismissal, removal, or compulsory retirement of an employee due to misconduct—especially corruption—the decision regarding forfeiture of retirement benefits will be reviewed and approved by the administrative ministry overseeing the PSU concerned.
What the new rule says
Previously, there was no provision to withhold retirement benefits in cases where PSU employees were terminated from service. Under the amended rules, any employee found guilty of corruption or other serious misconduct and consequently terminated will forfeit their pension and other post-retirement entitlements. The decision, however, will not be automatic and will be subject to a review by the respective administrative ministry.
The amended rules also state that provisions related to pension, family pension, and compassionate allowance—subject to future good conduct—will still apply to those employees even after dismissal, provided certain criteria are met.
Who is exempt from this rule?
The new pension rules will not apply to:
Railway employees
Casual and daily wage workers
Officers from the Indian Administrative Service (IAS), Indian Police Service (IPS), and Indian Forest Service (IFoS)
However, the rules will apply to all other central government employees who were appointed on or before December 31, 2003.
Impact and implications
This amendment marks a stricter stance by the central government toward corruption and misconduct in public service. By linking pension eligibility directly to an employee’s conduct, the government aims to enhance accountability within PSUs and deter illegal activities.
The Department of Personnel and Training (DoPT), which comes under the Ministry of Personnel, Public Grievances and Pensions, has stated that the move is part of a broader administrative reform to bring in higher ethical standards and transparency in public service.
This rule change is expected to have far-reaching implications for PSU employees and could prompt a reevaluation of internal compliance and conduct mechanisms across public sector organisations.
