Government to Increase Salaries and Pensions for Civil Servants in Upcoming Budget
The government is set to announce salary increments of up to 30% for civil servants through ad hoc allowances, while pensions are expected to see a 20% increase in the upcoming federal budget for the fiscal year 2023-24.
The Pay and Pension Commission has recommended the government to consider a 100% rise in medical and conveyance allowances for government employees, along with a 10% increase in ad hoc allowances.
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Three proposals regarding salary and pension increases have been prepared and will be presented in a special cabinet meeting chaired by Prime Minister Shehbaz Sharif. The final decision on the increments will be made during the meeting, and the chosen proposal will be presented to parliament alongside the budget.
The first proposal suggests a 100% ad hoc increase in medical and conveyance allowances, aligned with the Pay and Pension Commission’s recommendation. It also proposes a 10% increase in the allowance amount. Retired employees may witness a 100% increase in medical allowances and a 10% increase in pensions.
The Pay and Pension Commission argues that accepting the proposal would not burden the government’s pension bill and would not be objected to by the International Monetary Fund (IMF). Moreover, it would provide significant relief to the employees.
The second proposal aims to raise the salaries of all government employees (grades one to 22) by 25%, along with increasing medical and conveyance allowances. Medical allowances for pensioners would also increase, accompanied by a 15% increment in pensions.
The third proposal suggests a 30% salary increase for employees in grades one to 16, and a 20% increase for officers in Grade 17 and above. Additionally, a 50% increase in medical and conveyance allowances has been proposed, along with a 20% increment in pensioners’ medical allowances.
Furthermore, proposals to increase the pensions of Employees’ Old-Age Benefits Institution (EOBI) pensioners and the minimum wage of workers are under consideration.
While the Ministry of Finance acknowledges the reasonableness of the Pay and Pension Commission’s recommendations, the final decision rests with the government.
The commission’s report highlights concern over the high pension bill and the worries of financial institutions, including the IMF. As a solution, the commission suggests introducing a contributory or voluntary pension system for newly recruited employees, replacing the old pension system.
A voluntary pension system has already been implemented for government employees in Khyber-Pakhtunkhwa (K-P), with the approval of four Voluntary Pension System (VPS) fund schemes by the Securities and Exchange Commission of Pakistan (SECP).
No Objection Certificates have been issued for Trust Deeds of Pension Fund Schemes, which will be offered to government employees in K-P by two pension fund managers. The Central Depository Company of Pakistan Limited will serve as the trustee for these funds. All adult Pakistanis with a Computerized National Identity Card (CNIC) can benefit from the VPS.
Under the Voluntary Pension System Rules, 2005, employees and self-employed individuals can contribute to VPS during their employment, ensuring a regular income after retirement.
The SECP emphasizes that these new pension schemes will be funded through a combination of employee and government contributions. The funds will be managed by pension fund managers licensed by the SECP and registered with the K-P government.
