The Pakistani government has announced major reforms to its pension system, aimed at addressing the rising costs and ensuring long-term sustainability. These changes, effective from July 2024, follow recommendations from the Pay and Pension Commission of 2020 and introduce new regulations to streamline pension payments.

Key aspects of the reforms include:

1. Gross Pension Calculation: The gross pension amount will now calculated as 70% of the average salary over the last 24 months of service before retirement, ensuring a fair basis for pension calculations.
2. Voluntary Retirement Penalties: Employees opting for voluntary retirement after 25 years of service will face a 3% annual reduction in their pension, capped at 20%. This penalty applies to members of the armed forces and civil armed forces below a prescribed rank.
3. Pension Increment: Pension increments will be based on the net pension at retirement (baseline pension) and reviewed every three years, providing a systematic approach to pension adjustments.
4. Ordinary Family Pension: This pension will be available for 10 years after the spouse’s death or for life for disabled children. For other children, the pension will be provided until they turn 21 or for 10 years, whichever is later.
5. Special Family Pension: Available for 25 years after the spouse’s death or for life for disabled children, this pension will constitute 50% of the last drawn pension and is transferable to eligible heirs.
6. Re-employment: Pensioners re-employed after the age of 60 can choose between retaining their pension or drawing a salary from their new employment, offering flexibility for those who continue to work post-retirement.
7. Multiple Pensions: Individuals will only allowed to draw one pension. However, in-service employees can receive their spouse’s pension, simplifying the pension system and reducing redundancy.
8. Annual Surge: Pensions will adjusted based on 80% of the average inflation rate over the last two years, as determined by the Consumer Price Index (CPI), ensuring pensions keep pace with inflation.

These reforms mark a critical shift in Pakistan’s pension policy, aiming to create a more sustainable and equitable system for retirees and their families. The government’s initiative reflects a commitment to financial stability and social welfare, addressing the future increase in pension costs while balancing the needs of pensioners.

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