In March 2025 the Union Cabinet sanctioned a 2-percent Dearness relief (DR) increase, lifting it to 55 percent, effective from January 1, 2025. This benefits over 65 lakh pensioners under the 7th Pay Commission.
Arrears Payment Scheduled
As a result of the late announcement, DR arrears between January and March 2025 will be paid April 2025 pensions. This is a lump-sum compensation to retirees in increased inflation.
Pension Calculation Method
The 7th CPC applies a fitment factor of 2.57 thus fixing the minimum pension at 9,000. Pensions are computed at 50 percent of the notional pay in the pay matrix with consideration to service increments.
Impact on Pensioners
On a basic pension of 9,000, a 55 percent DR will give him 4950, which will add to the current monthly payment of 13950. A 30,000 pension with 16,500 addition on top to 46,500 increases the financial balance of the retirees.
No 18-Month Arrears Relief
In February 2025, the Finance Ministry declined to release 18-month DR arrears that the pandemic had frozen, disappointing pensioners, which Unions had demanded.
Transition to 8th CPC
The 7th CPC expired in December 2025 and the 8th CPC approved in January will expire in 2026. It can redefine DR to zero, combining it with pensions, and it can increase the minimum to ₹20,500.
Pension Projections
| Category | Basic Pension (₹) | DR at 53% (₹) | DR at 55% (₹) |
|---|---|---|---|
| Minimum Pension | 9,000 | 4,770 | 4,950 |
| Mid-Level Pension | 30,000 | 15,900 | 16,500 |
| Senior-Level Pension | 78,800 | 41,764 | 43,340 |
Plan for the Future
The 2% DR hike boosts pensions, but the 8th CPC looms. To be financially prepared, pensioners must check April arrears, and keep up with developments on dopt.gov.in.
Also read: Pension Update 2025: Why UPS Is the Future & OPS Is Financially Unsustainable