Federal govt introduces contributory pension scheme for new employees

The federal government has introduced a Contributory Pension Fund Scheme for new employees appointed on a regular basis starting July 1, 2024, according to a notification issued by the Finance Division. 

Under the scheme, employees will contribute 10% of their basic pay, while the federal government will contribute 20%. The rate of contribution is provisional and may be subject to adjustments. 

The notification, issued in line with a Cabinet decision made on June 27, 2024, outlines that the new pension scheme will apply to all civil employees appointed from July 2024 onward. It will also extend to members of the armed forces appointed on or after July 1, 2025.

Pakistan’s federal pension bill has ballooned by almost four times over the last five years and has become a growing concern for the government. However not much has been done to alleviate the national exchequer of this high cost. 

The estimated amount proposed to pay for pension in the federal budget for FY25 is Rs 1.014 trillion, marking a 26% increase from the previous year’s budget.

The new scheme, aimed at modernising pension contributions, applies to all federal civil employees, including civilians paid through defence estimates.

The new pension model represents a shift from the existing structure, aiming to streamline long-term pension management for new recruits across various sectors of government service.