Pakistan's Pension Overhaul: Belt-Tightening Measures Announced

The Pakistan government has enacted significant pension reforms to address a swelling pension bill over Rs 1 trillion. Key changes include discontinuing multiple pensions, modifying the calculation basis, and implementing a contributory pension system for new employees. The measures aim for a sustainable fiscal future.

The Pakistan government has implemented profound changes in its pension system, aimed at curbing a burgeoning pension bill exceeding Rs 1 trillion, according to reports. The move follows recommendations from the 2020 Pay and Pension Commission.

The Ministry of Finance issued notifications discontinuing multiple pensions and recalibrating pension calculations. The overhaul involves basing pensions on the average salary of the last two years instead of the final drawn salary. These regulations will impact both civil and military retirees, with few exceptions.

Projected to take effect starting January 1, the adjustments are integral to stabilizing one of the government's largest expenditures. Future pension costs are expected to become more manageable, partly due to the shift towards a contributory pension system for new employees, beginning in 2024 for civilians and in 2025 for military personnel.

(With inputs from agencies.)