Finance minister supports increasing retirement age to curb growing pension liabilities

Minister for Finance Muhammad Aurangzeb discussed the rising unfunded pension liabilities and supported the proposal to increase the retirement age from 60 to 62 years to address the growing pension bill, according to a news report. 

During a Senate Standing Committee on Finance meeting, chaired by Senator Saleem Mandviwalla, Aurangzeb acknowledged the massive scale of unfunded pension liabilities, noting that pension reforms had already been implemented to mitigate the issue. 

He explained that the Defined Contributory Pension system for civilians was introduced last year to curb the financial strain.

Senator Farooq H Naek of PPP proposed increasing the retirement age to 62 years to help control the pension burden, drawing a comparison to the judiciary’s age extension. Naek argued that raising the retirement age would retain experienced individuals who could contribute more before retirement. Senator Anusha Rahman supported the idea, even suggesting the retirement age could be extended further to 65 or even 70 years. 

Aurangzeb shared his personal experience, stating that in his previous banking role, he had successfully pushed for an increase in retirement age from 60 to 65 years.

However, officials from the Ministry of Finance pointed out that raising the retirement age for civilians might not significantly reduce pension costs, as a large portion of the pension burden stems from the early retirement of military personnel. The Ministry presented data showing that the budget allocation for the Army, Navy, and Air Force’s special package had been increased to Rs 510 billion for the 2025-26 fiscal year, compared to Rs 463 billion in the outgoing year.

Senator Faisal Vawda raised concerns about the National Finance Commission (NFC) and its impact on balancing the federal budget, suggesting that the requirement for an income tax certificate when purchasing property should be withdrawn. Vawda also proposed providing similar incentives for both property buyers and sellers and called for the abolition of section 7E in the 2025-26 budget.

In response to the ongoing debate on agricultural taxation, Finance Minister Aurangzeb confirmed that provinces would begin collecting agricultural income tax from July 1, 2025, and reiterated the government’s commitment to ensuring its collection despite previous challenges.