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EDITORIAL: The recent proposal to reduce retirement age from 60 to 55 years for the bureaucracy warrants a serious scrutiny. While it aims to alleviate the immediate pension burden on the national exchequer, it reflects a concerning inclination toward short-term solutions with potentially damaging long-term consequences.

The government’s approach to addressing pension reform requires a more holistic and sustainable vision — a vision that successfully aligns with global trends, demographic realities, and economic imperatives in an effective and meaningful manner.

Globally, the trend is moving in the opposite direction. Neighbouring India, for example, recently increased its retirement age from 58 to 60 years, and the average retirement age in OECD countries hovers around 65, with plans to extend it further in response to increasing life expectancy that has steadily risen across the globe due to advancements in medical sciences, and Pakistan is no exception.

Cutting five years off the working life of civil servants contradicts this trajectory, ignoring the demographic dividend of an ageing but healthier population.

The argument for increasing retirement age is backed by research suggesting that individuals between the ages of 60 and 70 are often in their most productive phase. At this stage, they combine decades of experience with robust intellectual capacity, making them invaluable to both public and private sectors.

By mandating early retirement, the government risks prematurely losing a wealth of knowledge and expertise, particularly in bureaucratic and administrative roles where institutional memory and seasoned judgement are irreplaceable.

From an economic perspective, this policy risks exacerbating the pension crisis that it seeks to resolve. Reducing the retirement age would not eliminate pension liabilities but rather shift them forward, potentially enlarging the pension pool over a longer horizon due to increased life expectancy.

Moreover, the burden of supporting retirees who exit the workforce earlier — while still healthy and capable — may outweigh any short-term fiscal relief the government anticipates.

Additionally, the proposal overlooks its impact on the workforce pipeline. Early retirements will necessitate a surge in fresh inductions and training programmes, placing additional strain on already stretched public resources. New recruits lack the institutional knowledge and experience of retiring employees, leading to a temporary but significant dip in efficiency and productivity. This gap could undermine the delivery of essential services and policy execution at a critical juncture for Pakistan’s governance.

There is also the troubling spectre of external influence in the genesis of this proposal. Reports suggest that a multilateral lender may have advocated this measure as part of broader fiscal reforms. Such entities have, in the past, been criticised for endorsing short-term, quick-fix solutions that prioritise immediate cost-cutting over structural resilience.

The energy sector, for instance, has suffered from reform prescriptions that failed to address systemic inefficiencies, leaving the country to grapple with the challenges of circular debt and chronic shortages. A similar approach to pension reform would be equally counterproductive.

That pension reform is undeniably critical for Pakistan is a fact. The pension bill consumes a substantial portion of public funds, leaving limited fiscal space for development spending. However, sustainable solutions lie in systemic reforms, not in curtailing the working lives of skilled professionals.

Options such as contributory pension schemes, incentivising private retirement savings, and rationalizing perks for high-income retirees can address the fiscal burden without compromising workforce productivity or institutional efficiency.

Furthermore, targeted measures to enhance workforce participation among younger demographics and women could complement pension reforms. Expanding the tax base through formalization of the economy and ensuring stricter compliance with tax laws would also provide the government with much-needed fiscal headroom to address long-term liabilities.

The government must recognise that reducing the retirement age is a policy step in the wrong direction. It signals a lack of confidence in the country’s ability to leverage its human capital effectively and undermines efforts to build a robust and inclusive economic future. A truly transformative pension reform plan would prioritise sustainability, equity, and efficiency over short-term expediency. Anything less risks trading today’s fiscal relief for tomorrow’s economic stagnation.

It is imperative for policymakers to resist the lure of quick fixes and focus on building a resilient economic framework. The proposed reduction in retirement age may offer immediate fiscal breathing room, but its long-term costs — economic, institutional, and social — are far too high to justify. Thoughtful and evidence-based reforms are the need of the hour, not short-termism masquerading as fiscal prudence.

Copyright Business Recorder, 2024

Comments

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KU Dec 05, 2024 12:43pm
Proves again n again that its all about the Raj. What about human capital called Pakistanis, who are now estimated at 10 million unemployed? Or the 62% rural area comrades suffering agri-destruction?
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M. Nawaz Dec 05, 2024 01:36pm
writer is bised... he is on burecuracy side
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Pakistani Dec 05, 2024 02:17pm
By retiring people 5 years earlier than the current practice will load hundreds of employees who become eligible to receive pension 60 months earlier. Has this amount and its impact been calculated?
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hooman Dec 05, 2024 02:31pm
How will reducing retirement age reduce pension liabilities? Surely it means that pensions have to be paid out earlier and for longer which will increase liabilities rather than reduce them?
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FJ Dec 05, 2024 03:19pm
Retirement age should be 40, it'll save even more money! What about all those retired brass, rehired as chairmen? And politicians should also retire at 55 now? Or 'democracy' is only for the rulers?
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Mehboob Dec 05, 2024 04:47pm
Good initiative of federal government of Pakistan. I think 55 is best option for retirement
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ARIF-UZ-ZAMAN Dec 05, 2024 06:35pm
Last year this government was to increase retirement age by 3-5 years to reduce the pension burden on exchequer. To address the same problem this year government is considering to retirement age.
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Javed Dec 05, 2024 07:07pm
80% of civil servants in bps 18 to 20 will be retired at once after 55 and remaining officers are WITHOUT training of Mid career and senior level training courses mandatory for promotion. Disaster
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Sarar Dec 05, 2024 09:11pm
@Mehboob , Early retirement means more people on pensions and for 5 years more. How will that save money? While world is moving to later retirement to save money, we go the opposite route.
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Junaid Dec 05, 2024 10:29pm
Retire them at proposed age and hire them as consultant exploiting their experience and capabilities. At current positions, they are the highest beneficiaries of the system
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Subhan Dec 06, 2024 07:11am
Most likely written by some serving babu. Paid content. Retire them all.
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Tarif Khan Dec 06, 2024 02:00pm
Let's set a standard. A retiree should not hop to other Govt institutions as heads etc. The age should dictate this. Let others in line with merit take positions.
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Ramzan Dec 06, 2024 03:12pm
This is reasonableness proposal, like our other affairs, aggred with your suggestions,
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Javed Hussain Khsn Dec 06, 2024 04:40pm
I think main issue is to take action against "corruption" in revenue generating departments with sincerity, honestly & on merit No audit of the auditors (Govt. Depts) is the key issue of the country.
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Abdullah Dec 06, 2024 06:50pm
There should be no pension at all for govt employee.how long will tax payer fund it.otherwise the private sector should get pension too
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Tariq Afridi Dec 07, 2024 05:06pm
Sorry state of affairs. There is nothing in this system so do what is required for the country. It's not joke It's
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Nasir Ali Dec 08, 2024 08:02pm
The problem is Government pay but not invest , distributed investment in 52 major cities wil enable 52 city families to lookafer their daily maters in best way tn few contractors revenue employees.
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Nasir Ali Dec 08, 2024 08:05pm
Country Adminsitration responsibility is to provide gateways, directions by paving the way reducing the hurdles inland people wil be investors ad value like china we need good direction honesty only.
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Hassan Dec 08, 2024 08:59pm
@Pakistani, of course yes
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Hassan Dec 08, 2024 09:01pm
@Javed, what training requirements? To loot more?
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Hassan Dec 08, 2024 09:03pm
@Abdullah, who stopped the private sector? You are venting out your frustration on missing a government job
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