The Government of Pakistan has initiated a new federal employees and armed forces pension scheme, which should make the scheme more sustainable and less a burden on the national treasury. The old pension scheme was repeatedly blamed on exerting enormous financial burden on the budget and this new program is set to develop a self-sufficient and fair system of pensioners in the future.
The new contributory pension system is going to divide the burden of funding the pension between the employee and the government. The total contribution according to the official notification published by the Ministry of Finance will be 22% of the salary, with 10 percent to be contributed by the employee and 12 percent by the government. To jump start this reform, the government has set aside Rs10 billion towards the new pension fund.
Only employees who are hired after July 1, 2024, will be subject to the new scheme, with current government employees remaining under the previous system. In the case of members of the armed forces, the new structure will be in effect on July 1, 2025. It is a significant policy change and a step toward achieving long-term financial stability in the public sector.
The federal government has introduced significant pension reforms as part of the Budget 2025–26, aiming to rationalise public spending and reduce the growing fiscal burden posed by the existing pension system#Pakistan #death #Employee #Death #Pension #Received #only #Ten #Years pic.twitter.com/nGWcza3MaB
— Voiceup Pakistan (@VoiceupPakistan) June 12, 2025
Early withdrawals are one of the major characteristics of the new pension scheme. Before they can retire, employees will no longer be able to draw funds out of their pension accounts. When they retire, however, they will be free to take up to 25 percent of the accumulated amount, and the rest will be used to provide a constant post-retirement income.
In a bid to effectively control the fund, the Ministry of Finance intends to establish a Non-Banking Financial Company (NBFC) which will control the activities of the pension fund. This step is undertaken in the recommendations of the international banking organizations like the World Bank, which ensures transparency and proper management of funds.
The reform is needed when the pension liabilities of Pakistan have become alarming, crossing the mark of Rs1 trillion by 2024. Pension payouts are estimated to cost the army force alone the amount of Rs742 billion by the year 2025. By launching this new contributory scheme, the government will seek to relieve and reduce the mounting burden on the pension sector as well as ensuring a more sustainable retirement among the working population.
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