The Finance Ministry has introduced significant amendments to the existing pension scheme to control rising pension costs.
These amendments, outlined in three separate office memoranda, aim to reduce the federal government’s financial burden while maintaining support for retired employees and their families.
The new notifications set the family pension receipt period after a retiree’s death at 10 years. The duration for receiving a Special Family Pension has also been extended to 25 years.
A key change is a new provision allowing a disabled child of a deceased retiree to receive a lifelong pension.
Additionally, the ministry has modified voluntary retirement conditions. Employees must now have at least 25 years of service to qualify for early retirement. However, early retirees will incur a 3% pension reduction each year they retire before the official age, calculated until the standard retirement age.
These amendments follow recommendations from the 2020 Pay and Pension Commission, addressing the pension system’s financial strain on the government.
Last year, pension payments reached Rs821 billion. This year, the figure has climbed to over Rs1 trillion and is expected to rise to Rs1.166 trillion next year. By 2026-27, expenditures are projected to reach Rs1.341 trillion, according to the ministry.
The government recently introduced a Contributory Pension Fund Scheme for new government employees, effective July 1. This marks a major shift in pension structuring for civil servants, designed to mitigate the growing pension-related fiscal burden.
Read: New Pension Fund Scheme Announced for Government Employees
This scheme, starting on July 1 for new civil servants and July 1, 2025, for civilian employees paid from the defense budget, requires new employees to contribute 10% of their basic salary to the pension fund, with the federal government contributing 20%.
