PSU misconduct may now cost full pension under new rules

May 31, 2025 Finance Talk Valli Sarvani

The Central government has introduced a tough new policy affecting pension benefits for certain public sector employees.

Under a recent amendment, PSU employees dismissed for misconduct may now lose their entire retirement benefits, marking a major break from previous rules.

This change took effect on May 22, 2025, through the Central Civil Services (Pension) Amendment Rules, 2025.

It targets employees who were once government servants but later joined PSUs through formal absorption.

Under the amended Rule 37(29C), a PSU employee previously absorbed from government service can now lose all pension benefits if dismissed for misconduct.

This includes the pension earned during earlier government service. Previously, such employees retained those benefits even after removal from a PSU.

The new rule eliminates that protection, linking any misconduct in the PSU directly to the loss of all retirement entitlements, including those from past government service.

However, the policy includes a safeguard. Any dismissal must now go through a review by the administrative ministry responsible for the PSU.

This step prevents arbitrary decisions and ensures oversight. Despite the stricter stance, the government has kept a few relief options open.

Pension or family pension might still be granted later if the person maintains good behaviour. Also, in special cases, a compassionate allowance may be provided.

These revised rules apply to central government employees who joined service on or before December 31, 2003.

However, the following are excluded from this rule: railway workers, casual or daily wage staff, and officers of the IAS, IPS, and IFoS services.

The amendment ties into other key pension rules, including Rules 7, 8, 41, and 44(5).

These rules now apply to PSU staff in similar ways as they do to regular government servants.

The government aims to ensure stricter accountability in public sector roles. At the same time, it has kept some provisions to balance fairness and compassion.

Image by Mohamed Hassan from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on August 05, 2018