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Nominees in Government Pensions

March 24, 2022
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By Nihit Nagpal and Devika Mehra

Pension is one of the major perks a Government servant is given upon one’s retirement from their post, as and when it occurs. It acts as a major source of security for the retiree to live a comfortable life with dignity upon retirement by having a constant source of income after having served the government for the number of years that one did. However, what happens if the retiree expires, leaving behind one’s dependents? How the pension will be paid to the beneficiaries on death of the person and the tax implications related to it depend upon the type of pension one has.

Nomination makes it easier to settle death claims as all banks and financial institutions have standard and simpler death settlement processes. However, in case of absence of nomination, there are a lot of documents that are required, such as a death certificate, a court order or Will, etc. It seems simpler on paper but ends up being a long process in reality.

A Nominee is known as the person that one can list in their investments or bank applications. He/she is the one who is responsible towards the proceeds of accounts of the deceased and shall be the recipient of the proceeds on the demise of the Pensioner, as per the relevant provisions of the Pensions Act, 1871. A nominee can be anyone which deem to be the pensioner’s first relative, such as parents, spouse, kids, siblings, etc., however the rightful owner of the proceeds shall be the lawful legal heir of the deceased[1] as was held in Oswal Greentech vs. Mr. Pankaj Oswal & Ors.[2]. The Hon’ble Court held “On the death of the holder of instrument, the amount/share vests with the legal heirs, the nominees merely holds the amount/share herein till the matter of vesting is decided in favor of the legal heirs.” Hence, a nominee is nothing but a person who received the payment on behalf of the heirs of the assured.[3]

There are some investments that allow multiple nominees. Under such investments one can assign percentages of money that a nominee would receive or else every nominee would have equal shares in the proceeds.

The Nominee may preferably be a family member, as the nomination form requires the nominator to describe his/her relationship with the nominee. Also, considering the fact that the legal heirs of a person are family members of such person, it only helps further if the nominee as well is a family member.

Nomination is deemed to be a critical activity which a lot of people miss out on and which eventually creates a hassle for their near and dear ones. A  startling data from Reserve Bank of India shows that thousands of crores of unclaimed deposits are lying in the banks across the country. These deposits are the ones where the original owner or the deceased has not claimed the money and no nomination details were filed for the same. This is a proof that shows how difficult it can get to retrieve your money where there is no nomination details filed.

Pensions Act, 1871 and Payment of Arrears of Pension (Nomination) Rules, 1983

The Central Government of India, while exercising its powers conferred under Section 15 of the Pensions Act, 1871, has prepared the Payment of Arrears of Pension (Nomination) Rules, 1983. These rules shall apply to the Central Government Pensioners, who are in receipt of any pension under the rules which govern such pensioners and their pension is paid out of the Consolidated Fund of India, by the Government.

Under the said rules, Nomination is defined as nomination made under these rules, i.e. the Payment of Arrears of Pension (Nomination) Rules, 1983. According to Rule 4 of the Payment of Arrears of Pension (Nomination) Rules, 1983, any pensioner who is paid pension by the Government out of the Consolidated Fund of India, may nominate any person as a nominee[4] who shall receive, after the death of the pensioner, all money payable to the pensioner on or before or after the date of such nomination, which remains unpaid immediately before the death of the pensioner.

According to the provisions of Rule 5 of the Payment of Arrears of Pension (Nomination) Rules, 1983, every retired pensioner shall nominate any person for the purpose of Rule 4 of the Payment of Arrears of Pension (Nomination) Rules, 1983. Nomination in such a case is done under Form A and is submitted, in triplicate, to the Pension Authority through whom pension is drawn, by way of personal service or by sending it through registered post. The Pension Disbursing Authority shall within thirty days of receipt of nomination in Form A, verify the particulars of the pensioners with the available records and return to the pensioner a duplicate copy of nomination in Form A duly attested by him or any other officer authorized by him in this regard. The original copy of the nomination shall be recorded properly and a triplicate copy shall be sent to the Accounts Officer of the Department from where the pensioner had retired.

Rule 5 of the Payment of Arrears of Pension (Nomination) Rules, 1983 further states that in case an employee is retiring after the commencement of these rules, the nomination shall be submitted in triplicate in to the Head of Office or the Department from where a person is retiring within three months before or after the date of retirement. The Head of Office shall within thirty days of receipt of nomination in Form A, shall verify the particulars of the pensioners with the available records and return to the pensioner a duplicate copy of nomination in Form A duly attested by him or any other officer authorized by him in this regard. The duly accepted copy, shall be sent to the Accounts Officer, in triplicate form, who shall further pass it to the Pension Disbursing Authority, along with a Pension Payment Order (PPO). In the situation where the PPO has already been issued, the said nomination shall be sent separately citing the PPO number and other particulars of the pension, to enable the Pension Disbursing Authority to link it with the PPO.

The Rule 5 of the Payment of Arrears of Pension (Nomination) Rules, 1983 also states that a notice of modification shall be submitted in triplicate in Form B, including the cases where the nominee pre-deceases the pensioner, to the Pension Disbursing Authority, by way of personal service or by sending it through registered post. The Pension Disbursing Authority shall within thirty days of receipt of nomination in Form A, verify the particulars of the pensioners with the available records and return to the pensioner a duplicate copy of nomination in Form A duly attested by him or any other officer authorized by him in this regard. The original copy of the nomination shall be recorded properly and a triplicate copy shall be sent to the Accounts Officer of the Department from where the Pensioner had retired.

The nomination form/document must be signed by the pensioner or shall bear thumb-impression of the pensioner, which is given in the presence of two witnesses who shall also sign the said declaration for nomination. The nomination shall take effect from the date of receipt of the same by the Pension Disbursing Authority or the Head of Office.

A nomination, that is made and is accepted by the concerned authority, i.e. Pension Disbursing Authority or the Head of Office, shall be considered to be a corroborative, with regard to the person nominated to receive arrears of pension of a pensioner.

Conclusion

Nomination is important to ensure that your pension goes in the right hands or to the person you desire after your death. Nomination helps to avoid any hassle in the future with regard to the withdrawing of investments or money from the bank accounts. It eases the process of death settlement claims with regard to investments with banks and financial institutions. If there is no nomination done for investments, in case of death, it will become burdensome for the legal heirs to take control of the investments. Therefore, to avoid such a situation, nomination is very important.

[1] https://ssrana.in/articles/legal-heir-or-nominee/

[2] Company Appeal (AT) No. 410 of 2018

[3] Uma Sehgal and Ors. vs Dwarka Dass Sehgal and Ord.

[4] Rule 5 of the Payment of Arrears of Pension (Nomination) Rules, 1983

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