Government Abolishes Multiple Pensions and Adjusts Benefit Calculations
ISLAMABAD: The Pakistani government has enacted sweeping reforms to the national pension system, marking a significant shift in how retirement benefits are calculated and distributed. These measures, effective immediately, aim to curtail unsustainable fiscal pressures and modernize the pension framework.
The reforms, approved on the recommendations of the Pay and Pension Commission 2020 (PPC), were formally notified on January 1, 2025. While the changes were part of the 2024-25 federal budget and initially slated for implementation on July 1, 2024, the official notification was delayed by six months.
Key Highlights of the Reforms:
- Abolishment of Multiple Pensions: Retirees will no longer be eligible to draw multiple pensions, a move designed to eliminate redundancy and streamline government expenditure.
- Revised Pension Calculations: Future pensionable benefits will now be based on the average salary drawn during the final two years of service, replacing the previous method of calculating pensions based on the last salary drawn.
- Reduced Future Benefits: The reforms also introduce curbs on future pension benefits, signaling tighter fiscal discipline.
- Penalties for Voluntary Retirement: New penalties are being considered for those opting for early retirement, further incentivizing longer service durations.
The Ministry of Finance underscored the importance of these changes in aligning the pension system with modern fiscal realities. “These reforms reflect our commitment to ensuring the sustainability of public finances while providing equitable benefits to retirees,” a ministry spokesperson stated.
However, the announcement has sparked mixed reactions. Critics argue that the revised calculation formula may disadvantage long-serving employees nearing retirement, while proponents emphasize the need for fiscal responsibility amid growing pension liabilities.
As Pakistan grapples with economic challenges, these reforms represent a decisive step toward balancing the country’s fiscal health with the welfare of its workforce.
