- author, Tanveer Malik
- position, Journalist
When you hear the word pension, the idea of a certain amount of money to meet your daily expenses after retirement comes to mind and that is why people in Pakistan generally prefer government jobs.
The federal government of Pakistan has recently introduced a new pension scheme to reduce the increasing burden of pension on the public exchequer with each passing year, raising many concerns and questions in the minds of the pensioners. .
The new scheme introduced by the government has been named as ‘Contributory Pension Fund Scheme’ which has been implemented from the beginning of the current financial year i.e. 1st July 2024.
The new pension scheme introduced by the federal government will be applicable to the federal civilian employees recruited in the current financial year and the employees recruited in the armed forces in the next financial year.
Before going into the details of this scheme, let’s briefly know who are the eligible pensioners?
Civil servants in Pakistan include civil and military employees who are paid a pension by the government after retirement which they receive as long as they live and in case of their death. Payment continues to his widow.
According to the existing rules, even after the death of a widow, if a government servant has an unmarried daughter, she continues to get her father’s pension till she gets married. However, now reforms have been introduced in the new pension scheme released by the government, the features of which are quite different from the old scheme.
This new pension scheme launched by the government has been launched at a time when Pakistan’s pension budget has crossed one thousand billion rupees.
It should be noted that the amount given to the retired federal employees every month in the form of pension is considered a huge burden on the country’s resources and some economists call it a ‘pension bomb’ for the government. It should be remembered that the fourth largest expenditure of the annual federal budget in Pakistan is pension.
According to economists, due to the country’s unprecedented debt burden, interest payments and rising defense expenditure, it is becoming increasingly difficult for governments to pay pensions.
How much pension does the government of Pakistan pay and why is it unable to bear this burden anymore?
Speaking to BBC Urdu, Adeel Malik, a professor of economics at Oxford University in the UK, said that a pension system that is financially sustainable and stable can be successful in any country.
He said that the present pension law of Pakistan is not working because the current financial condition of the country is unable to bear its burden and therefore it is necessary to adapt the pension bill according to the economic conditions.
It should be remembered that the amount allocated for the payment of pension in the budget of the current financial year is more than 1000 billion.
In Pakistan’s current fiscal year’s budget, the amount allocated for pension payments comes fourth after debt repayment, the defense budget and the annual development programme.
The government’s pension bill for the current year saw a significant increase as the government paid Rs 832 billion as pension to retired employees in the last financial year. According to the budget document of the current financial year, the government will have to bear the expenses of the pension bill of 122 billion rupees in the current financial year.
It should be noted that this year Pakistan has to pay 9700 billion rupees in interest on loans and spend 2200 billion rupees on defense, while the funds allocated for the annual development program are 1400 billion rupees, while the budget allocated for pension is 1014 billion rupees. On the other hand, 839 billion rupees have been allocated for running the civil government in the entire financial year.
What are the features of the new pension policy?
A notification was issued a few days ago by the Ministry of Finance of Pakistan through which the new pension policy i.e. ‘Contributory Pension Fund Scheme’ has been issued.
According to this policy, this scheme has been applied from July 1, 2024, according to which this scheme will be applied to the people recruited after July 1, 2024 in the federal government institutions in Pakistan.
However, it has been clarified that this scheme will be applicable from July 1, 2024 to such employees who will be recruited in federal civil institutions, while this scheme will be applied to employees recruited in the country’s armed forces from the next financial year i.e. July 1. It will happen from 2025 onwards.
Under this scheme, employees will contribute 10 percent of their basic pay to the new pension fund, while the federal government’s share will be 20 percent.
An amount of 10 billion rupees has been allocated for this pension fund by the federal government in the current financial year.
What will the government benefit from the new scheme?
Shahid Mehmood, an economist working at the Pakistan Institute of Development Economics, told BBC Urdu that the new pension scheme is a ‘contributory pension scheme’ which means that the government as well as the employees will contribute to it. .
He said that under the current system, the entire financial burden of pension is on the government, but under the new scheme, employees will also have to contribute to it during their employment and their contribution and the amount given by the government will be a pension fund. I will gather.’
The money accumulated in this pension fund will also be invested to generate profits. He said that this investment can be invested in stock market, insurance, government securities and other investment sectors to reduce the increasing burden of pension on the government.
Economic affairs journalist Shehbaz Rana told BBC Urdu that the new scheme will be applied to the employees recruited during the current year, while the former and current employees will be exempted.
He said that in the short term there is no benefit to the government and it will not have a positive impact on the budget, but in the long term the new scheme will make a difference and the expenditure on pensions will be reduced.
What is the Armed Forces Pension Budget?
In the current year’s federal budget of Pakistan, pension expenditure is 1014 billion rupees. This pension includes the pension given to the retired government employees of the civil government and the armed forces.
In the current budget, an amount of 2200 billion rupees has been allocated for defense expenditure, while in the total pension expenditure, 662 billion rupees have been allocated for the pension given to the retired employees of the armed forces.
On the other hand, 220 billion rupees have been allocated for the retired employees of the civil government.
The major increase in the pension bill in the current financial year is due to the increase in the pension given to the retired army personnel as Rs 583 billion was given as pension to the retired army personnel as per the revised expenditure of the last fiscal.
However, an amount of 662 billion rupees has been allocated for this purpose in the current financial year, which means an increase of 79 billion rupees.
On the other hand, the pension of 220 billion rupees was paid to the employees of civil institutions in the last financial year and this budget will be 228 billion rupees after an increase of 8 billion rupees in this financial year.
Shahbaz Rana further said that this scheme will not bring any financial benefit in the short term and the military has agreed to implement it in the new financial year for the recruitment of new employees in the forces.
“When it is applied to the military as well, it will be beneficial in the long term because currently 70 percent of the pension budget is spent on retired military personnel, while 30 percent goes to civil service employees’ pensions.” ‘
Who is entitled to pension and who is not?
Government employees working in civil and military institutions in Pakistan get pension at the end of service, but there are also government-run institutions called Autonomous bodies.
Shahid Mahmood said that the employees of such institutions are not paid pension from the budget of the federal government after retirement.
A list of such institutions has been provided on the website of the Cabinet Division of Pakistan.
These institutions include the National Highway Authority, Agricultural Development Bank, NADRA, Karachi Port Trust, various railway institutions, Pakistan Telecommunication Authority, OGRA and many other institutions whose employees’ pensions are not paid from the federal government budget.