For every senior citizen, income is quite important. When old people have a decent pension, they feel comfortable, secure and independent because they can use it to meet their basic needs like food and medicine.

In Pakistan, the number of old people receiving pensions is very small compared to the entire total population of old people in the country. It is believed that there are around 16 million old people in the country. Less than 15 percent of this group receives a pension.

In Pakistani society, parents devote their life to providing good education and good living conditions to their children; later, they expect that their children will support them in their old age. But rising unemployment and inflation are making it increasingly difficult for families to care for older relatives, causing increased stress and anxiety.

Pakistan has only two pension schemes. One is a tax-funded scheme for government employees, which reaches only seven to ten percent of old people. The second is a contributory Employee Old Age Benefit Institution (EOBI) scheme for employees in the private sector.

The pension cost for government employees is currently a concern for the government. Public-sector pensions are exclusively funded through the national budget. In the 2019-2020 budget, the federal government allocated Rs 421 billion to pensions; this constituted 5.7 percent of the current expenditure in the federal budget or about 3.2 percent of the GDP. This is likely to increase to around 11 percent of the GDP by 2050.

A point of greater concern is that even though the cost of pension payments is high, the actual reach is tiny, covering not more than 12 percent of the retired workers.

The current pension system is not capable of ensuring even basic income security for all older Pakistanis. Without reforms, older people will face uncertainty and deprivation.

The current pension system is not capable of ensuring even basic income security for all old Pakistanis. Without appropriate reforms, old people will face uncertainty and deprivation.

The first and most fundamental reform is to fund public sector pension through contributions, resulting in a contributory pension. In this way, the government will receive contributions, reducing its liability and allowing for the establishment of a more sustainable system.

Second, it is important to expand the coverage of the EOBI pension scheme. To increase pension coverage in the private sector, the government should ensure that all businesses register for the EOBI.

Pakistan has a big private sector, with a labour force share of around 75 million people, and people want to contribute to their pension so that they can receive an income in later life. But most employers are not registered for the EOBI.

The government should explore ways of enabling small and medium-sized businesses to enroll their employees in the scheme while strengthening monitoring and enforcement systems to compel employers to register for the scheme.

And last but not the least, the government should introduce a subsidised pension scheme for informal workers. A majority of Pakistan’s labour force works in the informal sector, including agriculture self-employment. The government should introduce a subsidised and simplified contributory scheme for informal workers.

This scheme should contribute to a gender-responsive pension system, as many women and transgender people work in the informal sector.

These pension policy reforms can contribute to a better resourced social protection system without creating an unmanageable burden for the government. If they are put into practice, we may be able to live in a country where all old people have a pension.