According to a senior official at the Ministry of Finance, all federal ministries and divisions have been requested to provide their input on proposed amendments to the pension scheme for existing pensioners and federal government employees. The comments from most ministries have been received and are being compiled for presentation to the Special Investment Facilitation Council (SIFC), led by the prime minister.
Several reform measures aimed at influential officers were announced by former finance minister Ishaq Dar in the 2023-24 budget speech but faced resistance. The proposed reforms, based on the recommendations of the Pay and Pension Commission 2020, aim to address the unsustainable rise in the pension burden on the budget.
In FY23, the pension bill was Rs609 billion, surging by 32% to Rs801 billion in FY24. The military pensioners’ bill increased by 26% from Rs447 billion to Rs563 billion, while the civilian bill rose by almost 40% from Rs163 billion to Rs228 billion in the same period.
To curb the annual growth rate, the finance ministry proposes lower benefits for retirement. For instance, future pension increases would be based on the gross or net at the time of retirement, indexed to the Consumer Price Index (80% of the CPI of the last three years), with a maximum increase of 10% per year.
Other proposed changes include discouraging early retirement by imposing a penalty of 3 to 10%, calculating pension based on the average of the past 36 months, changing the commutation/pension ratio to 25:75%, discontinuing the restoration of full pension after a certain number of purchased years, and establishing a pension fund.
The reforms also address issues like multiple pensions, pay and pension during reemployment, and restrictions on pension entitlement for unmarried/widow/divorced daughters for a limited period.