Amendments proposed to pension rules
ISLAMABAD: The Pay and Pension Commission (PPC), has proposed amendments in the pension scheme for existing pensioners and employees of the Government of Pakistan. The amendments are proposed in line with the increasing cost of pensions, which are expected to cross the Rs 1 trillion mark in the upcoming years.
Sources said that the PPC has proposed amendments to curtail future increase in pension costs, without compromising on the government’s pension philosophy.
Over the last 12 years, Pakistan’s federal pension budget allocation has gone up by 500%.
Earlier this year, the government allocated Rs. 761 billion in pensions for federal employees, which was later reduced to Rs 654 billion. This includes military and civil pensions and an additional 10 billion for a proposed pension fund. The total pension expenditure that is estimated this year, is a whopping 25% more than the previous year.
Following are the changes proposed to the pension structure for government employees.
Calculation of Gross pension
Under the new proposal, government employees shall be entitled to a gross pension, which is 70% of average pensionable emoluments (base salary) drawn during the last thirty-six months of service, prior to retirement.
This means that a person whose salary is Rs 100,000 in the last 3 years, will be entitled to Rs 70,000 in pension.
Early retirement penalties
A government employee may opt for early retirement after putting in 25 years of service; however the employee shall be liable to a penalty of 3% per year in gross pension, with effect from retiring year till the age of superannuation (actual retirement age).
Future increase
Any increases in pension shall be granted on the pension calculated at the time of retirement. Each increase shall be maintained as a separate amount until the time the government decides to review and authorise any additional pensionary benefits.
This proposal is expected to cater to the issue of compounded pensions. The government, for the first time included future retirees in the receivers of the increment awarded in 2009. In the following years, the same act was repeated more than 6 times. The step compounded increments for retirees, leaving service after 2020 for up to 6 times. This caused the pension figures to balloon to the levels that they are currently at.
Family pension
The document also proposes that a family’s pension, after the death or disentitlement of the guardian, shall only be admissible to remaining entitled family members for a maximum period of 10 years. Provided that in case of Shuhada pension, the maximum period for entitled family members will be 20 after the death or dis-entitlement of spouse;
In case of disabled/special children of a pensioner, the family pension shall remain admissible for life of such children.
Pension in case of re-employment/appointment after retirement
In an event where a pensioner of the federal government is re-employed/appointed in public service after retirement whether on regular/contract basis or whatsoever mode of employment, the pensioner shall have the option to retain either pension or to draw the salary of said employment during the currency of that employment.
Multiple pensions
In an event where a person becomes entitled to more than one pension, such person shall only be authorised to opt to draw one of the pensions.
Annual increase in pension
Annual increase in pension shall be granted as per formula (percentage of annual pension increase= percentage of consumer price index for that particular year; provided that annual increase in pension for that particular year shall not be more than 10%). In events of annual inflation above 10%, the federal government may authorise adhoc relief for pensioners which shall stand abolished upon reduction of inflation to normal level.
Sources said that the ministry of defence has reportedly also shared details with the finance division on pension reforms and they recommended that no proposal should discriminate against armed forces personnel.
Special family pension should not be disturbed (as per PM’s assistance package) due to the prevailing sensitive environment, special protection to the families of in-service deceased/shuhada families needs to be given.