The Finance Ministry launched new pension contribution rules to make the system more sustainable. Under the new plan, federal employees will contribute 10% of their pensionable pay. The government will add 12%, bringing the total contribution to 22%. This new model replaces the old pension system for new employees.
The Federal Government Defined Contribution (FGDC) Pension Fund Rules 2024 came under the Public Finance Management Act 2019. These rules replaced the August 2024 proposal, which suggested a 20% government share.
New Scheme Ensures Long-Term Stability
The new pension scheme applies to civil employees hired on or after July 1, 2024. It will include armed forces personnel starting July 1, 2025. However, implementation for the armed forces will happen later.
The government allocated Rs10 billion for 2024–25 and Rs4.3 billion for 2025–26 to support the shift. The World Bank supports this reform to control rising pension costs. These costs have become a major fiscal challenge for Pakistan.
Existing employees will stay under the old pension system. Therefore, the new plan focuses on lowering future pension liabilities, not changing current benefits.
How the New Pension Fund Works
Authorized Pension Fund Managers will manage all funds. The Accountant General’s Office will transfer the government’s 12% contribution to ensure transparency.
Employees cannot withdraw funds before retirement. After retirement, they can take up to 25% in cash. The remaining amount will stay invested for at least 20 years or until age 80, whichever comes first.
Salary slips will display detailed contribution and balance information. The Finance Ministry will also sign deals with fund managers offering death and disability insurance. These steps ensure financial protection for employees.
To manage operations, the ministry will create a Non-Banking Finance Company (NBFC). This company will monitor the fund until a permanent structure forms.
Shift Toward Fiscal Stability
The new pension model marks a major shift from the old system. It aims to secure retirements and strengthen Pakistan’s fiscal stability.
