Pakistan Implements Pension Reforms Amid Economic Challenges

In a bid to align with international fiscal standards, Pakistan has banned double pensions and revised its pension calculation methods. The government aims to curb liabilities amid a growing debt crisis, estimating pension liabilities at PKR 40-45 trillion. Reforms include new calculation bases and limitations on pension eligibility.

In an effort to adhere to the stipulations outlined by international financial institutions, Pakistan's government has effected a prohibition on the procurement of double pensions from the national treasury. This maneuver aligns with economic directives championed by entities like the International Monetary Fund (IMF) and World Bank, reports The News International.

Concurrently, significant alterations have been made to the calculation of pension benefits, now determined by the average earnings over the 24-month period leading up to retirement. Originally, pensions were derived from the last three decades of salary history, however, this policy has undergone revision due to pressing pension liabilities that necessitate urgent reform.

According to information disclosed by a senior official, the pension reforms are imperative given the escalating nature of future fiscal obligations, mirroring the rising debt burden. It is anticipated that combined pension liabilities for national and provincial governments range between PKR 40 to 45 trillion. Consequently, the Ministry of Finance, guided by the Pay and Pension Commission-2020's recommendations, released new regulations including the restriction of eligibility for multiple pensions.

While federal employees cannot draw pensions mid-service, spousal benefits remain intact, allowing a spouse to receive pension benefits concomitant with their own pay. Updated notifications highlight that pensions will be based on the average emoluments over the last two years of employment prior to retirement.

Future pension increments will be determined from the net pension at retirement, termed the baseline pension, with increases calculated independently until further authorization by the federal government. Regular assessments will occur every three years to ensure alignment with fiscal adjustments. The Ministry of Finance has mandated the reforms be applied with immediate effect, notes ANI.

(With inputs from agencies.)