Finance Ministry Introduces Pension Scheme Reforms to Manage Rising Costs
The Finance Ministry has implemented key changes to the current pension scheme to address the growing financial pressure from pension payments.
These reforms, detailed in three office memoranda issued by the ministry, aim to alleviate the financial strain on the federal government while still providing necessary support to retirees and their families.
According to the new notifications, the family pension after the death of a retired employee will now be provided for a fixed period of 10 years. Additionally, the duration for receiving a Special Family Pension has been extended to 25 years.
A significant change includes a new provision that allows a child with disabilities, who is the beneficiary of a deceased retired employee, to receive a lifelong pension.
The ministry has also updated the criteria for voluntary retirement. Employees must now complete at least 25 years of service to qualify for early retirement. However, early retirees will face a 3% reduction in their pension for each year they retire before the standard retirement age. This reduction will be calculated based on the remaining years until the official retirement age.
These amendments stem from recommendations made by the Pay and Pension Commission 2020, addressing the increasing financial pressure on the government’s pension system.
Contributory Pension Fund Scheme Introduced for New Employees
Last year, the government’s pension expenses reached Rs. 821 billion, and this year, they have exceeded Rs. 1 trillion. By 2026-27, pension costs are projected to rise to Rs. 1.341 trillion, according to the Finance Ministry.
In response, the government has introduced a Contributory Pension Fund Scheme for newly hired government employees, effective from July 1. This marks a major overhaul of the pension system for civil servants, aimed at reducing the growing financial burden on the federal budget.
The Contributory Pension Fund Scheme will apply to all new civil servants starting July 1, with a delayed implementation for civilian employees under the defense budget, who will be covered by the scheme beginning July 1, 2025.
Under this new scheme, new employees will contribute 10% of their basic salary to the pension fund, while the federal government will contribute 20%.
