The government has introduced significant changes to the pension policy to address rising pension costs. The Finance Ministry issued these changes through three separate memoranda. The amendments aim to ease the financial strain on the federal government while ensuring support for retired employees and their families.
The new policy fixes the period for receiving family pension after a retired employee’s death at 10 years. The duration for the Special Family Pension has been extended to 25 years. Additionally, a child of a deceased employee who has a disability will now receive a pension for life.
The policy also revises conditions for voluntary retirement. Employees can now opt for early retirement only if they have completed at least 25 years of service. Those who retire early will see their salary after retirement reduced by 3% for every year they retire before the official retirement age.
These changes follow recommendations from the Pay and Pension Commission 2020. The government spent Rs821 billion on retired funds last year, and this year’s it costs have risen to over Rs1 trillion. By 2026-27, these expenses expects to reach Rs1.341 trillion.
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Additionally, the government introduced the Contributory Pension Fund Scheme for new government employees. This scheme began on July 1 for civil servants and will start on July 1, 2025, for employees paid from the defense budget. Under this scheme, new recruits will contribute 10% of their basic salary to fund, while the federal government will contribute 20%.