ISLAMABAD: Pension reforms will strengthen public finances as these aim at reducing the pension bill (crossed Rs1 trillion), said Khurram Schehzad, Advisor to Finance Minister.
The changes will take effect from January 1, 2025.
He said the Pension Reform Commission 2020 had introduced pension reforms to reduce the huge cost and risks of pension liability on public finances.
Schehzad made adviser to finance minister
Secretary Finance Imdad Ullah Bosal has been instrumental in leading the reforms, said the advisor, adding that changes apply to both civilian and military personnel ensuring equality and fairness across the board.
The key initiatives and impacts include; Discontinuation of Multiple Pensions: Individuals will no longer be eligible to receive multiple pensions, reducing overall financial burden.
Revision of Pension-Calculation Method: Pensions will now be calculated based on the average salary of the last 24 months of service, rather than the last drawn salary, impacting approximately 300,000 government employees.
-Reduction in First-Take-Home Pension: The first take-home pension has been reduced, and the base for determining future increases has been lowered, resulting in a significant decrease in the pension bill.
-Introduction of Baseline- Pension System: A baseline pension system has been introduced, where the net pension calculated at the time of retirement will be termed as the baseline pension.
This system will ensure that pensioners receive a fair and sustainable pension.
Periodic Review of Baseline-Pension: The baseline pension will be reviewed every 3-yr by Pay and Pension Commission to protect pensioners from inflation and changing economic conditions.
Digitization of Pension System: The pension system will be digitized for over 300,000 government employees, improving accuracy, and transparency, and reducing red tape and corruption.
Contributory Pension Fund: A contributory pension fund has been announced for employees hired from July 1, 2024, to manage the liability in the future.
Elimination of Annual Compounding: Annual compounding of pension benefits has been ended; any increase will be treated separately from the base pension.
These reforms aim to reduce the pension bill (crossed Rs1 trillion), The changes will take effect from January 1, 2025.
By applying these reforms equally to both civilian and military personnel, the government ensures fairness, equity, and a more sustainable pension system for all.
The government’s efforts to address the growing pension liability demonstrate its commitment to prudent fiscal management and ensuring the long-term sustainability of the pension system, the advisor added.
Copyright Business Recorder, 2025
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