Pension buyout scheme – MOU signed in DBS Bank India Ltd


A Memorandum of Understanding (MoU) has been signed for a pension buyout scheme between the Management of DBS Bank of India Ltd. with the Lakshmi Vilas Bank Employees’ Union (NCBE) on 26th July 2022. Lakshmi Vilas Bank (LVB) gave mandate to Indian Banks Association (IBA) for the 11th industry-wide Bipartite Settlement. But after merger of LVB with DBS Bank of India Ltd., the mandate was withdrawn. Hence the DBS Bank of India ltd did not implement the 11th bipartite settlement. In order to hold negotiations with the LVBEU on wage revision, the Management of DBS Bank of India Ltd. laid a pre-condition that the union should agree for a new pension buyout scheme. Thus a MoU was signed.

The salient features of the scheme:

  • The management informed the Union that out of total operating expenses (Stand-alone eLVB), around 62.60% was incurred towards salary and benefits and 48% of the salary cost was incurred towards pension. The management informed the Union that with such high cost being incurred towards pension, the pension scheme must be reviewed and replaced before proceeding with any wage revision discussions. As a pre-condition to wage negotiations, the Unions should agree for a pension buyout scheme in lieu of the present industry wide pension regulations
  • The salary components namely Basic Pay, Fixed Personal Pay, Graduation Pay, Professional Qualification Pay, Notional value of Driver allowance, Head Peon Allowance, Single Window Operator Allowance, Daftary Allowance (as applicable) as on 31.03.2022, shall be taken into consideration for the calculation of Pension. One increment value on their running scale will be notionally added with March 2022 basic wages to calculate the pension, for employees whose increment shall be due during the period 01st April 2022 to 31st December 2022.
  • In order to maximize the benefits to the members, additional years of service will be added to the actual years of service as detailed below. If the fraction of the service is six months or more but less than one year, will be counted as one year and less than six months will not be counted for the number of years of service.
Years of serviceNo. of additional years of service
31 years of service and above3 years (max at 36 years)
20 years to 30 years of service6 years (max at 34 years)
18 years to 19 years of service4 years
15 years to 17 years of service3 years
Less than 15 years of service2 years
  • The formula for calculating Pension will be as follows

Wages / Salary as on                                                     No. of years of service       Applicable DA

31-March-2022 (plus notional value of                   (including additional              as on 31 03 2022

one increment, as applicable)                             X     years of service)                       +    on the pension

————————————————–                  ——————————-

                       2                                                                 33

  • Under the Pension buyout scheme, there will be 2 options given to members for  them to choose the appropriate one –

Option 1: After the demise of the eligible employee a tax-free lump-sum i.e., ROC value will be paid to the legal heirs of the deceased employee.

Option 2: After the demise of the eligible employee, the spouse shall receive the same quantum of pension as family pension. Further, after the demise of the spouse, tax-free lump-sum i.e., ROC value will be paid to the legal heirs.

Note: Upon enrolment to pension buy out scheme, the existing pension scheme will cease automatically.

  • Upon enrolment to pension buy out scheme, the employee continues to be in employment with the Bank till the cessation of employment, with continuity of service for all retirement/terminal benefits till the cessation of employment.
  • Proposed scheme is Voluntary and we expect maximum participation (say 80% and above) from eligible employees.
  • Post opting for the pension buyout scheme, voluntary retirement with pension benefit will not be applicable. However, employees will be permitted to opt for Voluntary retirement only with eligible retirement benefits excluding pension.

The bank may come out with a working sheet to all employees individually to help them opt for the scheme.

A bare reading of the pension regulations and the envisaged pension buyout scheme of DBS Bank of India ltd, we observe the following:

  • This scheme is thrust on the Union as a pre-condition to the wage negotiation and to reduce the cost of the pension benefit. Then how can this be beneficial to the employees?
  • When there is a time-tested defined benefit scheme is available for the Government employees and bank employees and when there is a united effort to improve the same by way of updation etc. why any union should accept this?
  • There is a rosy picture that the employees can receive pension while in service, but that pension is pegged at that stage itself is the reality behind that; i.e. the pension as per the buyout scheme, is based on the present basic pay, though the employee may have many more years to retire and is eligible to receive higher basic pay.
  • Those who opt for Voluntary Retirement Scheme will not be eligible for pension.
  • The pension scheme as envisaged by DBS Bank of India Ltd covers those who are under old pension scheme as per Pension regulations 1995 and are presently in service
  • This scheme does not apply to those who are covered under NPS
  • Similarly, this scheme does not apply to those who had retired.
  • The various classes of pension as available at the industry level are not available in this buyout scheme. (Superannuation pension, Pension on voluntary Retirement, Invalid pension, Compassionate allowance, Premature retirement pension, Compulsory retirement pension are the various classes of pension available as per regulations)
  • The pension buyout scheme does not provide payment of commutation, which is available in pension regulations
  • It is apprehended that the recently increased family pension at the rate of 30% of the pay agreed at the industry level may not to be implemented at DBS Bank of India ltd.
  • The scheme is silent on payment of DA to the pensioners on the lines of pension regulations.
  • Breaking away from industry wide bipartite settlement and pension regulations, will be detrimental to the interests of the employees as the ideal concept of collective bargaining will be lost and more importantly, the pensionary benefits will be far reduced.

The MoU says that this new scheme is voluntary. Then, in their own interest and in the interest of the industry, the employees should reject this scheme as it will be detrimental to the interest of the employees.

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