Govt Announces Comprehensive Pension Policy Overhaul

Pakistan-Finance Ministry has unveiled significant amendments to the current pension system in an effort to manage the surging pension expenses. The new guidelines, detailed in three separate office memoranda, aim to alleviate the financial pressure on the federal government while maintaining support for retired employees and their families.

Under the revised regulations, family pensions will now be provided for a fixed period of 10 years following the death of a retired employee.

In addition, the Special Family Pension duration has been extended to 25 years. A noteworthy new provision allows children of deceased retirees, who have disabilities, to receive a pension for life.

The amendments also introduce changes to the voluntary retirement process. Employees opting for early retirement will now be required to have a minimum of 25 years of service. Moreover, those who choose to retire before the standard retirement age will face a penalty: their pension will be reduced by 3% for each year they retire early, with the reduction based on the time remaining until the standard retirement age.

These updates are being implemented based on the recommendations of the Pay and Pension Commission 2020, aimed at addressing the increasing financial strain on the federal pension system.

Last year, the government spent a staggering Rs821 billion on pension payments. This year, the pension bill has surged to over Rs1 trillion, and it is projected to reach Rs1.166 trillion next year. By the year 2026-27, pension expenditures are expected to balloon to Rs1.341 trillion, as per the Finance Ministry.

Government Unveils New Contributory Pension Fund Scheme for Civil Servants

Last week, the government officially rolled out a new Contributory Pension Fund Scheme for newly hired civil servants, marking a major overhaul in the pension structure aimed at easing the financial strain on the federal budget. The scheme, which takes effect on July 1, introduces a significant shift in how pensions will be managed for future government employees.

Under the new scheme, all newly recruited civil servants will be covered starting July 1. However, for civilian employees whose salaries are funded by the defense budget, the scheme will be implemented a year later, beginning July 1, 2025.

This move is part of the government’s broader strategy to address the escalating costs associated with pension obligations and to ensure a more sustainable pension system moving forward.

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