Firm being formed to manage new pension scheme of civil servants

ISLAMABAD: After getting an endorsement from the Army’s General Headquarters (GHQ) for introducing contributory pension for new entrants from July 1, 2025, the government has approved the establishment of a Non-Banking Finance Company (NBFC) for managing the contribution of funds for new entrants in the civilian side with effect from July 1, 2024.

Top official sources confirmed to The News on Thursday that the first three directors of the NBFC included Federal Secretary Finance Imdad Ullah Bossal, Saad Fazal Abbasi, Additional Finance Secretary and Aquil Raza Khoja, former general manager Punjab Pension Fund. Aquil Khoja may be appointed as an independent director. Ms Nasheeta Mariyam Mohsin, special secretary finance, may be appointed as chief executive officer (CEO) of the federal government as per the requirement of NBFC Regulations 2008.

The government also authorised Rs1 million to meet expenditures on account of running the affairs of the NBFC. The ECC of the cabinet considered the summary on June 13, 2024, submitted by the Finance Division regarding the amendments to the pension scheme. The ECC, after holding deliberations with the Finance Division and Law and Justice Division, directed that the new pension rules would be made applicable for the new entrants in the service of the federal government with effect from July 1, 2024 except employees of armed forces, who would join the defined contributory system (DCS) with effect from July 1, 2025.

The official said that the GHQ had granted assent in principle that for new entrants, the amended pension rules would be made applicable with effect from the next fiscal year starting from July 1, 2025. The ECC also directed the Finance Division to present the report of the Pay and Pension Commission. Sources said there was no proposal under consideration for reducing the age limit from 60 to 55 years for federal government employees at the moment.

The terms of reference of Pay and Pension Commission-2020 (PPC-2020) already mentioned that the commission would review the current pension scheme. Accordingly, CPC-2020 has recommended an amendment to the pension scheme for existing pensioners and employees to curtail future increases in pension costs without compromising on the government’s pension philosophy.

Earlier, it was proposed that the federal government employees would be entitled to a gross pension based on 70pc of average pensionable emoluments, drawn during the last thirty-six months of service before retirement. At the moment, the gross pension is calculated based on the last 30 years of drawn salary. Now this formula is under consideration to be changed.

A government employee may opt for early retirement after putting in 25 years of service; however, the employee would be liable to a penalty per year reduction in gross pension with effect from retiring year till the age of superannuation. Any increase in pension would be granted on the pension calculated at the time of retirement. Each increase would be maintained as a separate amount until the time the government decided to review and authorise any additional pensionary benefits.

It is under consideration that the family pension, after the death or dis-entitlement of the spouse, might only be admissible to remaining entitled family members for a maximum period of 10 years. Provided that in the case of Shuhada Pension, the maximum period for entitled family members would be 20 years after the death or dis-entitlement of spouse; provided further that in case of disabled/special children of a pensioner, the family pension would remain admissible for the life of such children.

For commutation, it is proposed that the federal government employee may have the option to commute a maximum of 25pc of his gross pension at the time of retirement on the terms and conditions prescribed by the federal government. It is 35 per cent at the moment, so this formula is also under consideration to be changed.