The Finance Ministry has announced significant changes to the pension scheme to address the rising costs associated with pensions.
The new amendments, detailed in three separate office memoranda, aim to alleviate the financial strain on the federal government while maintaining support for retired employees and their families.
Key updates include:
- The family pension period after the death of a retired employee is now set at 10 years.
- The duration for receiving a Special Family Pension has been extended to 25 years.
- A new provision allows a disabled child of a deceased retired employee to receive a pension for life.
Additionally, new conditions for voluntary retirement have been introduced. Employees opting for early retirement must have at least 25 years of service. Those who retire early will face a 3% reduction in their pension for each year they retire before reaching the official retirement age. This reduction will be calculated based on the remaining time until the standard retirement age.
These changes follow recommendations from the Pay and Pension Commission 2020 in response to the increasing financial pressure on the pension system.
Also notable is the introduction of a Contributory Pension Fund Scheme for new government employees, effective July 1. This scheme represents a major shift in the pension structure, designed to manage the growing financial burden. Under this scheme, new civil servants will contribute 10% of their basic salary to the pension fund, with the federal government contributing 20%. For civilian employees funded by the defense budget, the scheme will begin on July 1, 2025.
Last year, pension payments amounted to Rs821 billion. This year, the pension bill has risen to over Rs1 trillion, with projections reaching Rs1.166 trillion next year and Rs1.341 trillion by 2026-27, according to the Finance Ministry.
