The Finance Ministry has introduced critical amendments to the existing pension scheme to manage the escalating pension costs.
These amendments, outlined in three separate office memoranda issued by the ministry, are aimed at reducing the financial burden on the federal government while ensuring continued support for retired employees and their families.
According to the newly issued notifications, the period for receiving a family pension after the death of a retired employee has been fixed at 10 years. Additionally, the duration for receiving a Special Family Pension has been extended to 25 years.
One of the most notable changes is the introduction of a provision for the entitled child of a deceased retired employee to receive a pension for life if the child is suffering from a disability.
The Finance Ministry has also revised the conditions for voluntary retirement. From now on, a minimum of 25 years of service will be mandatory for employees opting for early retirement. However, there is a penalty: those who retire early will see their pension reduced by 3% for each year they retire before reaching the official retirement age. This reduction will be calculated based on the remaining period until the standard retirement age.
The amendments are based on recommendations from the Pay and Pension Commission 2020 in response to the growing financial strain on the federal government's pension system.
Also Read: Contributory Pension Fund Scheme introduced for new employees
Last year, the government spent a staggering Rs821 billion on pension payments. This year, the pension bill has surged to over Rs1 trillion, and it is projected to reach Rs1.166 trillion next year. By the year 2026-27, pension expenditures are expected to balloon to Rs1.341 trillion, as per the Finance Ministry.
Last week. the government had officially introduced a Contributory Pension Fund Scheme for newly recruited government employees. The scheme, taking effect from July 1, marked a significant shift in the pension structure for civil servants and was aimed at managing the growing financial burden of pensions on the federal budget.
The Contributory Pension Fund Scheme would be applicable to all new civil servants from July 1. For civilian employees whose salaries were drawn from the defense budget, the scheme would come into effect a year later, on July 1, 2025.
Under the new scheme, newly recruited employees would contribute 10% of their basic salary to the pension fund. In contrast, the federal government would contribute 20% to the same fund.
