Pension reforms introduced to ease burden on exchequer

ISLAMABAD: The federal government has introduced pension reforms to cut financial expenditures after proposing a 15% hike in pensions of government employees in the Budget FY25 unveiled earlier this month.

The fresh amendments were introduced by the federal government to cope with an increasing burden on the national exchequer on account of pensions entitled to employees and their families.

The documents, obtained by Geo News, of the reviewed pension scheme showed recent modifications approved and notified by the federal government, covering different categories of post-retirement allowances, and existing and future pension hike plans.

Sources told Geo News that the amendments were formulated with consultations of finance, defence and interior ministries.

Federal government employees shall be entitled to a gross pension based on 70% of average pensionable emoluments drawn during the last 24 months of service prior to retirement.

In the light of proposed amendments, a pensioner will have the option to retain either a pension or draw a salary from said employment in case of re-appointment in public service on a regular or contractual basis after retiring at the age of 60 years.

Ordinary, special family pension

Ordinary Family Pension, after the death or ineligibility of the spouse, shall be admissible to remaining entitled family members for a maximum period of 10 years, the document read.

In the case of the entitled children, Ordinary Family Pension shall remain admissible for 10 years or till the age of 21 years whichever is later, it added.

The government employees who came under the category of accidental retirement would get pensions by the age of 60 years.

Special Family Pension, after the death or ineligibility of the spouse/first recipient, shall be admissible to remaining entitled family members for 25 years after the death or ineligibility of the spouse/first recipient.

In the case of disabled or special Children of a pensioner, the Special Family Pension shall remain admissible for the life of such children.

Voluntary retirement penalties

A federal government employee may opt for retirement after putting in 25 years of service; however, the employee shall be liable to a flat reduction rate of 3% per year in gross pension based on the number of completed months from the date of retirement to the date of superannuation.

Such flat reduction in gross pension shall be capped at 20%.

Provided that in cases of Armed Forces and Civil Armed Forces, voluntary retirement penalties will apply only if retirement is sought and granted prior to the prescribed Rank Service, the document stated.

As per the proposals compiled by the Economic Coordination Committee (ECC) of the federal cabinet, the government will establish a Pension Fund and frame rules for its operations.

Additionally, a Defined Contributory Scheme may also be introduced in the federal government for new entrants next month.