Pakistan’s unsustainable public pension system
In the last ten years, while Pakistan’s tax revenues increased by 2.7 times, the pension bill from the federal government, which includes military pensions (36 percent of the total
annual pension liabilities), increased by 5.2 times.
The local toll is said to be even higher, with numbers estimated at 7.1 times. Since 2013, numbers of government retirees have increased by 25 percent; however, the pension expense has increased by 432 percent from Rs 55 billion to Rs 238 billion.
This does not include pensions that the government is responsible to pay such as for those working in state owned enterprises or Pakistan Railways. Last year’s total pension liabilities of the federal and provincial governments claimed a quarter of revenues collected by FBR.
Pensions are an accepted tool to support people after their retirement. They are provided to those who retire after attaining a certain age or having completed their service period. The system has existed in one form or the other for centuries, initially adopted by armies to compensate soldiers and the wounded and act as an inducement for encouraging individuals to join military service.
The general concept of pensions originated later in the 19th century as militaries and government service employment expanded so did the pension base worldwide, later it was also introduced in the private sector.
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