LAHORE: To reduce the financial burden on the provincial treasury, the Punjab government has commenced implementation of pension reforms under which early retirement from government service has been disallowed before the age of 55 years or 25 years of service; this initiative will save Rs 85 billion over the next three years.

As per the details shared by the Punjab Finance department here on Thursday, this is part of the Finance department's pension reforms initiative to curtail pension-related liability, which has become a major source of financial risk for the provincial government.

The government has undertaken this landmark pension reform by amending the Punjab Civil Servants Act 1974, considering the significance and future financial implications of the pension payments.

"The decision to impose restriction on early retirements, without affecting pension entitlements, has been taken in view of the rising trend of government employees seeking voluntary early retirement from service. In the last three years, approximately 60 percent of the total annual retirements were voluntary early retirement retirements," it added. Speaking on the reform initiative, Punjab Finance Minister Hashim Jawan Bakht said that the pension reforms are a central pillar to reducing its financial burden on the provincial government coffers.

"With the current growth rate of pensions and salaries payments, the government will run out of finance to carry out development expenditures in the near future. If the ever-increasing pension expenditure continues to grow unchecked it will constrain fiscal space for development programmes," he added.

According to him, the net impact for the provincial government out of this decision, in terms of cash flow, shall be over Rs 85 billion over the next three years. This is expected to provide ample fiscal space for planning appropriate welfare and development projects throughout the province.

Commenting on the reform initiatives, Punjab Finance Secretary Iftikhar Ali Sahoo said that the pension reforms will help in retaining skilled and experienced staff for a longer period and also help save government resources. "This is a step in the right direction to streamline a fragmented system," he added.

Copyright Business Recorder, 2021