Islamabad, January 2, 2025 – Pakistan has introduced sweeping reforms to pension rules, effectively restricting individuals from drawing multiple pensions simultaneously. This move, outlined in a notification issued by the Pakistan Finance Division, is based on the recommendations of the Pay and Pension Commission 2020 and aims to streamline pension disbursements and curb inefficiencies in the system.
Under the new regulations issued by Pakistan, individuals entitled to more than one pension will now be permitted to opt for only one. The notification specifies the following key provisions:
1. Federal government employees who are in service and become eligible for a pension will not be allowed to draw the pension while still employed.
2. However, an in-service or pensioner spouse will remain eligible to receive their spouse’s pension in addition to their own salary or pension.
The Finance Division has clarified that these amendments are effective immediately, superseding existing instructions on the subject.
Changes to Pension Calculation in Pakistan
Significant changes have also been made to how pensions will be calculated. Moving forward, pensions will be determined based on the average pensionable emoluments drawn during the last 24 months of service prior to retirement, rather than the final salary. This adjustment seeks to create a fairer calculation framework and prevent undue inflation of pension amounts.
New Methodology for Pension Increases
The government has introduced a detailed methodology for future pension increases, which includes:
• Baseline Pension: At the time of retirement, the net pension (gross pension minus the commuted portion) will be established as the baseline pension.
• Increment Management: Any subsequent increases in pension will be calculated and granted on the baseline pension.
• Separate Records: Each increase will be maintained as a distinct amount until further review or changes are authorized by the government.
• Periodic Review: The baseline pension will undergo a review by the Pay and Pension Committee every three years.
For existing pensioners, their current pension, as of the notification date, will be considered the baseline pension. This baseline will include any restored commuted portions.
Objective of Reforms
The Finance Division stated that these changes are aimed at improving the sustainability of the pension system while ensuring fairness and efficiency. The government believes these adjustments will address long-standing concerns and bring greater clarity to pension disbursement policies.