Finance ministry recommends overhaul of pension system

Under the proposed changes, the calculation of pension would be based on the average of the last three years' drawn salary. The pension duration for unmarried, divorced, and widow daughters, would be restricted to 10 years 

The Ministry of Finance has put forth a series of sweeping changes in a proposal aimed at reforming the pension system for retired public sector employees. While exempting defense and armed forces personnel from these alterations, the recommendations include a shift in the basis for calculating pension, a reduction in the commutation formula, and changes in the duration of pension entitlement for certain categories of retirees.

Under the proposed changes, the calculation of pension would be based on the average of the last three years’ drawn salary, departing from the current practice that considers the last drawn pay. The commutation formula, which determines the lump sum upfront amount at the time of retirement, would see a reduction to 25 percent, with 75 percent to be paid in monthly installments in subsequent years. This marks a shift from the existing formula of 35 percent at retirement and 65 percent in subsequent years.

Furthermore, the pension duration for specific categories of retirees, such as unmarried, divorced, and widow daughters, would be restricted to 10 years, as opposed to the current lifetime entitlement. However, exemptions would be available for Shuhada families, extending to 20 years, and for disabled sons and daughters, who would receive lifetime pension benefits.

In an effort to make pension adjustments more responsive to economic conditions, the proposal suggests that any increase in pension would be indexed with the Consumer Price Index (CPI), with a maximum allowable increase of 10 percent per annum. Early retirement would be discouraged, and a penalty ranging from three percent to ten percent would be applicable to retiring individuals.

While the reforms have not been officially implemented, the proposal could signal significant changes in the pension landscape for public sector employees in Pakistan. It is noteworthy that under the proposed reforms, individuals re-employed in the public sector would need to choose between salary and pension benefits, and the government would no longer authorize both simultaneously.

The changes in pension calculation would transition to a defined contributory model, with expenses no longer borne by the government. Federal government employees would be entitled to a gross pension based on 70 percent of average pensionable emoluments drawn during the last 36 months of service before retirement. The option for early retirement, after 25 years of service, would carry a penalty of a three percent reduction in gross pension per year until reaching the age of superannuation.

Additionally, family pension entitlements would be limited to a maximum of 10 years after the death or disqualification of a spouse, with the Shuhada Pension extending to 20 years. For disabled or special children of pensioners, family pension benefits would be granted for the lifetime of such children.

The proposal also introduces the option for federal government employees to commute up to 25 percent of their gross pension at the time of retirement, subject to terms and conditions set by the government.


  1. ye jo 2 karor ki gariyaan ac dc ko di hain 16 months govt. ne tab app soooo rahe they. unhain kiyoun nahi rokkka. Burucrates and sisiiiy fazoool no. of leaders should be not more than 15. to control whole pakistan. Unproductive expenses should be stored and un necessary numbers of fazooool parliamentarians should be restricted to 15 persons. ok. Ye pensions rokne se saaray addaray khali ho jain ge sub abroad ja ker nokri karain ge. Tu kia app khud bhaith ker addaray chaplain ge. Ye it bohath foresightely dekhane ki chizain hain
    imf pagal bana raha hai app ko. Wase banana ki zaroorat tu naih.

  2. better option is to link their benefits with performance and productivity. If the organization is generating profits then they should be paid better while white elephants like PIA, and many others should bear losses with reduction in salary and benefits of it’s employees instead of sucking blood from whole of nation.
    And we must stop free luxuries of public sector officers at all levels regardless of their grades.

  3. The slab of Salaries of Beurucrsy should be at the maximum limit of 500000/_and pension slab should be at the maximum level of 100000/- all the liabilities of utility bills of beurucracy should be withdrawn.The facilities
    luxury vehicle’s and plots on retirement should be withdrawn

  4. as you can see, military is extending their benefits at the expense of people of Pakistan. stealing the source of living of common man

  5. this will be totally injustice with the government employees, as they are responsible for soomth management of all government affairs in all weather. presently the government employees are paying the highest income tax, comparing other sectors of society. Government must halt any such proposal otherwise strong resistance will be seen. As per information the federal govt is spending around 188 billion rupees on for payment of pension to retired government employees. whereas this year 7200 billion rupees has been allocated in budget for payment of just intrest on loans government secured n original loan will be intact. why government is not reducing such heavy expenditure instead of killing government pensioners.


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