ISLAMABAD: The federal government has announced major reforms in the country’s pension rules by introducing a new contributory pension fund scheme. The move aims to tackle Pakistan’s growing pension burden, which has reached Rs10.55 trillion for the fiscal year 2025–26.
According to a notification from the Ministry of Finance, the new pension rules are designed to make the system financially sustainable and reduce pressure on the national budget. The contributory pension model will apply to all federal employees recruited after July 1, 2024, replacing the traditional pension setup.
Under the new system, 22% of an employee’s salary will be contributed to the fund — 10% from the employee and 12% from the government. The fund will be managed by a non-banking finance company (NBFC) under the Finance Ministry’s supervision. Officials said the model follows global contributory pension rules, encouraging employees to save regularly while ensuring long-term financial security after retirement.
The reform will not affect existing government employees. However, for the armed forces, the new framework will come into effect from July 1, 2025. To initiate the program, the government has already allocated Rs10 billion for establishing the new pension fund.
As per the withdrawal policy, employees will not be allowed to access their funds before retirement. Upon retirement, they may withdraw up to 25% of their accumulated amount, while the remaining 75% will be converted into a monthly pension to provide a stable post-retirement income.
The Finance Ministry stated that the new policy was developed with the support of international financial institutions, including the World Bank, as part of Pakistan’s ongoing fiscal reform efforts.
Officials emphasized that the changes to the pension rules aim to reduce long-term financial risks. Over the past decade, pension liabilities have surged from Rs421 billion to over Rs10 trillion, making them one of the largest components of current expenditures.
A senior Finance Ministry official said the new system strikes a balance between government support and employee contribution, aligning Pakistan’s pension structure with international best practices.
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