ISLAMABAD – The Securities and Exchange Commission of Pakistan (SECP) has published a white paper following the National Workshop on Transitioning to a Defined Contribution (DC) Pension Scheme, held on June 17, 2025. The workshop, which included senior representatives from federal and provincial governments, as well as the insurance and pension fund industries, focused on transitioning from Pakistan’s current Defined Benefit (DB) pension model to the more sustainable DC pension system.
A Defined Contribution pension scheme is a retirement plan where the employee and employer make regular contributions to an individual account during the employee’s career. The eventual pension depends on the amount contributed and the performance of the invested funds. This is different from the Defined Benefit model, where the pension amount is predetermined based on factors like salary history and years of service, which can be costly and fiscally unsustainable for governments in the long run, as Pakistani exchequer has found out in the last decade.
The Government of Khyber Pakhtunkhwa (KPK) began implementing DC pension reforms in July 2022, enrolling all newly hired employees into the scheme with a contribution of 10% from employees and 12% from employers. Following KPK’s lead, the Punjab government also adopted similar reforms, and other provinces are in the process of establishing their own frameworks.
The SECP’s white paper consolidates key insights from the workshop, discusses progress made by provincial governments, and provides actionable recommendations to support the nationwide rollout of the DC system. These include finalising the pension scheme framework, ensuring tax consistency, amending labor laws, and increasing employee awareness about the changes.
The document serves as a reference for stakeholders working toward the long-term goal of equitable pension reform in Pakistan.
