Govt Rolls Out Contribution Based Pension Scheme

The federal government has formally adopted the Federal Government Defined Contribution Pension Fund Scheme Rules, 2024, which is a shift from the traditional non-contributory pension model to a contributory framework under SRO 1728(I)/2025.

The notification, dated August 27, 2025, was circulated across ministries and federal institutions for immediate implementation. Under the new rules, future pension entitlements of federal employees will be determined through contributions from both employer and employee.

For civilian federal staff, the employer will contribute 12% of pensionable pay, and the employee will contribute 10%. The scheme has yet to be implemented for the armed forces, where contributions currently remain at zero.

Sources say the reform is designed to lessen fiscal strain and improve the long-term sustainability of the pension system. Contributions from all parties will be pooled into a dedicated fund, and investment returns will determine eventual pension payouts.

The change marks one of the most consequential reforms in Pakistan’s public financial management in years, as mounting pension liabilities had become harder to bear under the old system.

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The notification has been sent to the Auditor General of Pakistan (AGR), the Accountant General of Pakistan Revenues (AGPR), the State Bank of Pakistan (SBP), and all relevant ministries, including Defence, Education, Railways, Energy, IT, Climate Change, among others, to align operations with the new scheme.

Pension liabilities have ballooned in Pakistan recently. In FY25, the federal pension bill (including military pensions) crossed Rs. 1 trillion, making it one of the top recurring expenses and placing increasing pressure on the national budget.

Reform is part of Pakistan’s commitment under the IMF programme to trim unsustainable liabilities and promote fiscal sustainability.