The government of Pakistan has proposed significant modifications to the pension system in an effort to alleviate the financial burden on the country’s economy ¹ ² ³. The proposed changes aim to reduce the financial load of pension payments, which are expected to exceed Rs 1 trillion in the coming years ³.
The key modifications include calculating pensions based on the average of the last three years’ drawn salary, reducing the commutation formula to 25%, and limiting pension entitlement for certain categories of retirees ² ³. Additionally, the proposal suggests indexing pension increases with the Consumer Price Index (CPI) and introducing penalties for early retirement ² ³.
The changes also aim to transition the pension system to a defined contributory model, where expenses will no longer be borne by the government ². Federal government employees will be entitled to a gross pension based on 70% of average pensionable emoluments drawn during the last 36 months of service before retirement ¹ ² ³.
The proposal also introduces the option for federal government employees to commute up to 25% of their gross pension at the time of retirement ². Family pension entitlements will be limited to a maximum of 10 years after the death or disqualification of a spouse, with exceptions for Shuhada families and disabled or special children ² ³.
The proposed modifications are expected to significantly impact the pension landscape for public sector employees in Pakistan ². The government’s efforts to reform the pension system aim to reduce the financial burden and ensure sustainability for future generations ³.
