ISLAMABAD: Following the recommendations of the International Monetary Fund (IMF), the federal government on Wednesday announced significant reforms to its pension system for retired employees.
The Finance Division has issued an Office Memorandum in this regard, stating the changes to pension calculation, restrictions on double pensions, and a revised methodology for annual increases.
The changes were implemented on the recommendations of the Pay and Pension Commission 2022 to enhance transparency and reduce the financial burden on national treasury annually.
As per sources within the ministry, the new pension measures will save billions of rupees annually.
To streamline pension calculations, retired employees, entitled to more than one pension, will now only be eligible to receive only one. In-service federal government employees entitled to a pension will also not be eligible to draw that pension while still employed.
According to the Office Memorandum, the pension records of over 300,000 employees have been computerised and the new pension system will automatically include pension increments through computerised methods.
The memorandum further notified that in-service employees or pensioners whose spouses are also entitled to a pension may receive their spouse’s pension in addition to their own.
Moreover, the finance division has introduced a “baseline pension” concept. The net pension calculated at time of the retirement excluding the commuted portion will be termed the baseline pension.
“The Pay and Pension Commission will review baseline pensions every three years to ensure adjustments align with economic conditions. For existing pensioners, the current pension as of January 1, 2025, will serve as the baseline, including any restored commuted portion,” it added.
Earlier, the federal government mulled a proposal for government employees to retire five years earlier. It will affect the average retirement age from 60 to 55 years in an effort to reduce the ever-increasing pension budget.
Dawn citing a source reported that this is one of the proposals suggested by an international lender and is currently under the federal government’s consideration as part of wider pension reforms.
