The federal government has announced a new contributory pension fund scheme to address Pakistan’s growing pension burden, which has reached Rs10.55 trillion in 2025–26.
New Pension Plan for Future Employees
According to the Ministry of Finance, the reform aims to make the pension system more sustainable and reduce pressure on the national budget. The new scheme will apply to all federal employees hired after July 1, 2024, replacing the traditional pension system.
Under this plan, 22% of an employee’s salary will go into the pension fund—10% contributed by the employee and 12% by the government. The fund will be managed by a non-banking finance company (NBFC) under the Finance Ministry’s supervision.
Officials said this model is similar to international contributory pension systems, encouraging savings and ensuring financial security for retirees.
The scheme will only cover newly hired employees. For the armed forces, the plan will start on July 1, 2025. To launch the fund, the government has allocated Rs10 billion.
Withdrawal Rules and Retirement Benefits
Employees cannot withdraw money before retirement. After retirement, they can take out up to 25% of their accumulated balance. The remaining 75% will be converted into a monthly pension, providing steady income after retirement.
Officials said the policy was developed with guidance from international financial institutions, including the World Bank, as part of Pakistan’s ongoing fiscal reform efforts.
Rising Pension Costs a Serious Concern
The Finance Ministry noted that pension liabilities are now one of the largest parts of government spending. In the current fiscal year, total liabilities reached Rs1.055 trillion, including Rs742 billion for the armed forces and Rs243 billion for civil servants.
Over the past decade, the pension bill has jumped from Rs421 billion to over Rs10 trillion, creating a major challenge for Pakistan’s budget.
A senior Finance Ministry official said the reform is designed to secure the financial future of public employees while protecting the national budget from unsustainable liabilities.
“The new contributory pension model ensures a fair balance between government support and employee responsibility, aligning Pakistan’s system with global standards,” the official added.
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