Military and civil pension allocations increase by nearly 12%, while funding for the Federal Pension Fund more than doubles.
ISLAMABAD: The federal government has allocated Rs1.17 trillion for pension payments in FY2026-27, marking an increase of nearly 12 percent compared with the previous fiscal year, according to the official budget documents.
The higher allocation reflects the growing fiscal burden of pension obligations, with expenditure on both military and civil pensions set to rise during the current financial year.
Pension expenditure rises by 12%
The budget estimates total pension expenditure at Rs1.17 trillion for FY2026-27, compared with Rs1.06 trillion allocated for FY2025-26.
The increase comes as the government continues to manage rising expenditure commitments while seeking to contain the overall fiscal deficit.
Military pensions account for the largest share
Military pensions continue to represent the largest component of the federal pension bill.
According to the budget documents, the government has allocated Rs822 billion for military pensions in FY2026-27, up from Rs742 billion in the previous fiscal year.
The increase reflects higher pension liabilities resulting from annual pension revisions and the growing number of pension beneficiaries.
Civil pension allocation also rises
The allocation for civil pensions has also been increased.
The government expects to spend Rs272.50 billion on civil pensions during FY2026-27, compared with Rs243 billion allocated in FY2025-26.
The additional allocation is intended to meet pension obligations for retired federal civilian employees.
Federal Pension Fund receives higher allocation
The budget also provides a significant increase in funding for the Federal Pension Fund.
An allocation of Rs10 billion has been earmarked for FY2026-27, more than double the Rs4.30 billion allocated in the previous fiscal year.
The enhanced funding is aimed at strengthening the government’s long-term pension financing arrangements.
Cost of annual pension increase
The government has estimated that the annual increase in pensions announced for pensioners will cost Rs64.50 billion during FY2026-27.
In comparison, the corresponding cost of the pension increase in FY2025-26 was estimated at Rs65.70 billion.
Economists note that Pakistan’s pension bill has continued to grow steadily in recent years, placing increasing pressure on public finances. They argue that while pension payments remain a critical obligation, long-term reforms to the pension system may be necessary to ensure fiscal sustainability as the number of retirees continues to rise.