ISLAMABAD: The federal government has introduced a new Contributory Pension Scheme for public servants, marking a historic shift in Pakistan’s pension structure.
Under the new system, every newly recruited federal employee will contribute 10% of their monthly salary toward a pension fund, while the government will add 12%, bringing the total contribution to 22%. This scheme replaces the previous pension model for all civil employees hired on or after July 1, 2024.
According to the Federal Government Defined Contribution (FGDC) Pension Fund Scheme Rules 2024, the plan has been launched under the Public Finance Management Act 2019. It will be managed and regulated through the Voluntary Pension System Rules 2005 and Non-Banking Finance Companies and Notified Entities Regulations 2008.
The Finance Ministry confirmed that the rules for armed forces personnel will take effect from July 1, 2025, though implementation is still pending. Meanwhile, current government employees will remain under the existing pension system.
To ensure smooth execution, the government has allocated Rs10 billion for FY 2024-25 and Rs4.3 billion for FY 2025-26. The move follows recommendations from the IMF and World Bank to control Pakistan’s growing pension expenditure, which has reached Rs1.05 trillion for 2024-25, a 29% increase from last year.
The Accountant General of Pakistan will manage deposits, recordkeeping, and fund transfers, while authorized pension fund managers will handle investments. Employees cannot withdraw their funds before retirement; however, they may withdraw up to 25% at retirement, with the remainder invested for 20 years or until the age of 80.
To safeguard employees’ savings, the scheme includes insurance coverage for cases of death or disability. A Non-Banking Finance Company (NBFC) will monitor and oversee the fund’s operations through digital systems.
This reform replaces the old defined benefit model with a defined contribution system, aiming for financial sustainability and improved retirement security for future government workers.
