Pakistan Launches Contributory Pension Scheme for Federal Employees
The federal government has introduced a major pension reform with the launch of the Contributory Pension Scheme for public servants. This move marks a key shift in how pensions are managed and funded in Pakistan.
New Pension Rules for Federal Employees
Under the new Contributory Pension Fund Scheme Rules 2024, federal employees will contribute 10% of their salary toward their pension fund. The government will add 12%, bringing the total contribution to 22%.
These rules replace the old pension system for all employees recruited on or after July 1, 2024. The Finance Ministry’s Regulation Department has issued the Federal Government Defined Contribution (FGDC) Pension Fund Scheme Rules 2024 under the Public Finance Management Act 2019.
The new framework will operate under the Voluntary Pension System Rules 2005 and NBFC Regulations 2008. It updates the August 2024 guidelines that had fixed the government’s contribution at 20%.
Sustainable Pension Management and Oversight
The scheme will initially apply to civil employees, including those in civil defence. Rules for armed forces personnel will take effect from July 1, 2025. The government has allocated Rs10 billion for FY 2024-25 and Rs4.3 billion for FY 2025-26 to support the transition.
The reform follows IMF and World Bank recommendations to reduce the rising pension burden, which reached Rs1.05 trillion for FY 2024-25 — a 29% increase from last year.
Authorized pension fund managers will manage the funds, while the Accountant General of Pakistan will handle deposits and records. Employees cannot withdraw funds before retirement but may withdraw up to 25% upon retirement. The remaining amount will stay invested for 20 years or until age 80.
The Finance Ministry will ensure digital payments and insurance coverage in case of death or disability. A non-banking finance company (NBFC) will monitor implementation and compliance.
This reform shifts Pakistan’s pension system from a defined benefit model to a defined contribution model, ensuring fiscal stability and secure retirements for future employees.
