Pension Reforms: What will public servants get after retirement?
Business
The reforms include modifications to pension calculation, restrictions on double pension
ISLAMABAD (Dunya News) – In a significant move which will have far-reaching impact on countless public servants, the federal government has introduced pension reforms aiming to reduce financial burden on the national exchequer.
The changes, implemented through an Office Memorandum (OM) issued by the finance division on Jan 1, 2025, are based on the recommendations of the Pay and Pension Commission 2022.
These reforms include significant modifications to pension calculation, restrictions on double pensions, and a revised methodology for annual increases.
According to the OM, pensions will now be calculated based on the average of pensionable emoluments drawn during the last 24 months of service prior to retirement.
This replaces the previous calculation methods, which were less standardised and prone to discrepancies.
Furthermore, senior officials entitled to multiple pensions must now choose one pension to draw.
The memorandum specifies: “Federal government employees who are currently in service and become entitled to a pension will not be eligible to draw that pension while still employed.”
However, in-service employees or pensioners whose spouses are also entitled to a pension may receive their spouse’s pension in addition to their own.
The new policy introduces a “baseline pension” concept, defined as the net pension calculated at the time of retirement, excluding the commuted portion.
13 CHANGES TO RULES
Earlier, 13 amendments to rules were proposed by the federal government to lessen burden on the national exchequer.
According to sources, the first amendment proposed that the government employees would receive a gross pension equal to 70pc of their salary from two years before retirement.
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The second amendment allows employees to retire willingly after 25 years of service. The third revision stipulates that those who opt for voluntary retirement at least three years before reaching the age of 60 will face a pension deduction of between five and 20 percent per annum.
The fourth amendment bases the annual increase in pension on the amount received at the time of retirement. The fifth amendment counts the annual increase in pension as a separate amount.
The sixth amendment mandates that the Pay and Pension Commission will review the baseline pension every three years.
Also, the seventh amendment allows a pensioner's family to receive the pension for up to 10 years. Another amendment provides lifetime pensions for the children of pensioners if they are physically or mentally disabled.
Another one specifies that those who join government service after retirement can receive either a pension or a salary. The 12th revision ensures that a government employee will be allowed to a pension from only one department if re-employed.
The 13th amendment states that if both husband and wife are government employees, both will receive pension upon retirement.
