Islamabad:
The federal government has officially implemented the contributing pension scheme for public employees and marked a major reform in the pension system.
Under the rules of the new contributing pension conduits, federal employees will now contribute 10% of their wages to their pension fund to qualify for a 12% government contribution, which makes the total contribution 22%.
This scheme replaces the old pension system recently recruited employees, and the Ministry of Finance’s regulatory department has issued the federal government’s defined contribution (FGDC) Pension Fund Fund Rules
2024, formulated in accordance with the Law on the Management of Public Finance 2019.
The scheme will be regulated in accordance with the voluntary pension system rules 2005 and non-bank financing companies and notified unit’s regulations 2008 and replaces the rules for August 2024, which had determined the government’s contribution to 20%.
The new rules apply to civilian employees recruited on July 1, 2024 or after July 2024, including those in civil defense. The rules of armed forces staff take effect from July 1, 2025, but are still awaiting implementation.
The government awarded RS10 billion to FY 2024-25 and RS4.3 billion to FY 2025-26 to support the system introduced in accordance with the recommendations of the International Monetary Fund (IMF) and the World Bank to reduce the growing fiscal burden of pension.
Current employees will not be affected. However, the reform aims to slow down the rising pension expenses estimated for RS1.05 trillion for 2024-25, an increase of 29% from last year.
According to the new rules, authorized pension wand managers manage the fund. General Auditor for Pakistan Office will handle deposits, recording and transfers.
Employees are not allowed to withdraw money before retirement; Upon retirement, they can withdraw to 25%, with the rest invested for 20 years or up to 80 years.
The Ministry of Finance will contract pension fund managers who support electronic transfer systems and ensure insurance coverage in the event of death or disability. A non-bank financing company (NBFC) will oversee the system’s implementation and monitoring.
This marks a major shift from the defined distribution model to a defined contribution system – aimed at financial sustainability and better pension security for future government employees.
