Govt updates pension scheme

June 30, 2024 (MLN): In response to unsustainable pension expenditures, the Federal Government of Pakistan has made significant amendments to the current pension scheme effective from July 1, 2024, approved lately by the ECC too.

These changes, based on the Pay and Pension Commission-2020 (PPC-2020) recommendations, aim to ensure the sustainability of pension payments without compromising the government's commitment to its pension philosophy.

With regards to the gross pension calculation, the federal employees will receive a gross pension based on 70% of their average pensionable emoluments drawn during the last 24 months of service prior to retirement.

Whosoever wants voluntary retirement will have to pay a penalty. Employees retiring after 25 years of service will face a 3% annual reduction in gross pension for each year short of superannuation, capped at 20%.

For Armed Forces personnel, penalties apply only if retirement is before the prescribed Rank Service.

The pension calculated at retirement will be termed as baseline pension. Increases will be granted on the baseline pension. Each increase will remain separate until further government review.

The baseline pension will be reviewed every three years by the Pay and Pension Committee. Existing pensioners' current pensions will be considered as their baseline pension.

Post-death or ineligibility of the spouse, this pension will be available to entitled family members for up to 10 years, or until the children reach 21 years.

This pension will be available to family members for 25 years after the spouse's death or ineligibility. Disabled or special children will receive it for life, with the rate enhanced to 50% of the last drawn pension for all Armed Forces ranks.

Pensioners re-employed in public service after 60 can choose to retain their pension or draw the new salary.

Individuals entitled to multiple pensions can only draw one, except an in-service or pensioner spouse, who can receive their spouse's pension in addition to their own.

Annual pension increases will be at 80% of the average inflation rate over the last two years, based on the State Bank of Pakistan's CPI.

These comprehensive amendments aim to control the rising pension costs and ensure the system's financial sustainability while continuing to support retired employees and their families.
 

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