Reforms include ban on multiple pensions, end of heirs entitlement after 10 years

ISLAMABAD: In the much-hyped pension reforms, the government has approved drastic measures including slapping a ban on securing multiple pensions and limiting provision of pension for family members only to 10 years.

The government will calculate gross pension based on 70 per cent of average pensionable emoluments drawn during the last 24 months of service prior to retirement. According to a summary, approved by the ECC under chairmanship of the finance minister recently, pension is a defined benefit, and is currently admissible to the entitled employees and their families in the federal government.

Expenditure on account of pension is increasing day by day and is becoming unsustainable. The terms of references of Pay and Pension Commission-2020 (PPC­2020) stated that the commission would review the current pension scheme.

Accordingly, the PPC-2020 recommended amendments to a pension scheme for incumbent pensioners/ employees to curtail future increases in pension costs without compromising on the government’s pension philosophy. Amendments to pension scheme were also accordingly announced in the budget speech for financial year 2023-24.

On the basis of the PPC-2020 recommendations, the Finance Division proposed certain amendments to the pension scheme for incumbent pensioners/ employees. As per Regulation-4 of Civil Service Regulations (CSR), the Government of Pakistan reserves to themselves the right to change the provisions in these regulations regarding pay, allowance, leave, and pension, from time to time at its discretion, and to interpret in case of a dispute.

The summary was circulated to the Ministry of Defence, Establishment Division, and Ministry of Interior for view and comments, and the response of all these stakeholders may be perused respectively.

In terms of CSR-4, the Finance Division proposes as under:

Amendments proposed in para 3 may be approved.

A pension fund may be established utilising the savings that are likely to accrue from reforms proposed at para 3 for capitalising the proposed fund. The federal government shall frame rules for the operations of the pension fund.

A defined contributory scheme may be introduced in the federal government for new entrants with effect from (w.e.f.) July 1, 2024. The federal government shall frame rules for the scheme ibid [in the same place] that in the exercise of powers conferred under regulation 4 of Civil Service Regulations and in pursuance of Cabinet Decision.

The federal government is pleased to approve the following amendments to the existing pension scheme w.e.f. July 1, 2024:

i. Calculation of gross pension

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

ii. 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 3pc 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 20pc.

Provided that in cases of armed forces and civil armed forces voluntary retirement penalties will apply only if retirement is sought/granted prior to the prescribed rank service.

iii. Future increase methodology in pension

The net pension calculated at the time of retirement will be termed baseline pension.

Any increase in pension shall be granted on baseline pension.

Each increase shall be maintained as a separate amount until the time the federal government decides to review and authorise any additional pensionary benefits.

Baseline pension will be reviewed by Pay and Pension Committee after every three years.

Provided that the current pension of existing pensioners on the date of issuance of these amendments shall be considered as baseline pension.

Provided further that baseline pension is deemed to include restored commuted portion of pension as and when restored.

iv. Ordinary family pension

The 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, provided that;

In case of disabled/special children of a pensioner, the ordinary family pension shall remain admissible for life of such children.

In case of the entitled children, ordinary family pension shall remain admissible for 10 years or till the age of 21 years whichever is later.

v. Special family pension

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 spouse/first recipient.

In case of disabled/special children of a pensioner, the special family pension shall remain admissible for life of such children.

Rate of such pension for eligible recipients is enhanced to 50pc of last drawn pension admissible to the first recipient for all ranks of armed forces/civil armed forces without min/max limits and transferable to all eligible heirs as per order prescribed in Rule 12 of Pension Regulations Vol-I (Armed Forces), 2010.

vi. Pension in case of re-employment/ appointment after retirement

In an event where a pensioner of the federal government, after the age of 60 years, is re-employed/appointed to public service after retirement whether on regular/contract basis or whatsoever mode of employment, the pensioner shall have the option to retain either his/her pension or to draw the salary of said employment during the currency of that employment.

vii. Multiple pensions

In an event where a person becomes entitled to more than one pensions, such person shall only be authorised to opt to draw one of the pensions, provided that;

Where an in-service federal government employee becomes entitled to a pension, such federal government employee shall not be eligible to receive such pension.

The in-service/pensioner spouse shall be eligible for pension of his/her spouse in addition to his/her own pay/pension.

viii. Annual increase in pension

Annual increase in pension shall be granted at 80pc of average inflation rate for the last two years. For this purpose, the year-on-year Consumer Price Index (CPI), as announced by the State Bank of Pakistan, shall be used as reference.