Pakistan’s New pension reforms aim to reduce PKR 45 trillion liabilities amid IMF pressure

Islamabad [Pakistan] January 2, (ANI): The Pakistan government has imposed a ban on receiving double pensions from the national treasury to meet the requirements set by multilateral lenders such as the International Monetary Fund (IMF) and World Bank.
Additionally, the government has decided to calculate pension benefits based on the average earnings of the 24 months leading up to an employee's retirement, The News International reported.
A proposal had been made to grant employees a gross pension based on 70 per cent of the average pensionable emoluments earned during the last 36 months of service before retirement. Currently, the gross pension is calculated based on the last 30 years of salary.
However, this formula has now been revised, and pension benefits will be calculated based on the average salary of the 24 months preceding retirement. This decision was taken by the federal government, acknowledging that pension reforms are urgently needed due to the rapidly increasing pension liabilities.
A senior official informed The News on Wednesday night that these reforms are essential as future obligations are rising, similar to the growing debt burden. The combined pension liabilities of the Centre and the four provinces are estimated to be between PKR 40 to 45 trillion, considering the current size of the public sector.
The Regulation Wing of the Ministry of Finance released various notifications stating that, following the recommendations of the Pay and Pension Commission-2020, it has been decided that, in cases where an individual is eligible for multiple pensions, they will only be allowed to choose one pension to receive, under the condition that an in-service federal government employee who becomes entitled to a pension will not be eligible to receive the pension while still in service.
However, the spouse of the in-service employee or pensioner will be eligible for their spouse's pension in addition to their own pay or pension. According to a new notification, pension calculations will be based on the average of pensionable emoluments drawn during the last 24 months of service prior to retirement.
Furthermore, the methodology for future pension increases has been outlined: the net pension (gross pension minus the commuted portion) at the time of retirement will be termed the baseline pension, with any increases applied to this amount.
Each increase will be treated separately until the federal government authorizes further pensionary benefits.
The baseline pension will be reviewed by the Pay and Pension Committee every three years, with the current pension of existing pensioners being considered the baseline pension, including any restored commuted portion once reinstated. These changes will take effect immediately, as per the ministry's announcement. (ANI)