Understanding Pakistan’s Pension Reforms 2024

This article narrates changes to Pakistan’s government pension system for both existing retirees and those retiring after July 1st, 2024. Here’s a breakdown:

For Retirees Before July 1st, 2024:

• Your current pension: This remains unchanged. It’s calculated as 70% of your pensionable salary (already done) plus any ad-hoc increases you received before July 1st, 2024 (increases from 2011, 2015, 2022, 2023, and 2024).
• Future Increases: Any future ad-hoc increases will be based on your current pension amount (called Baseline Pension). This Baseline Pension will be reviewed every 3 years for potential adjustments.

For Retirees on or After July 1st, 2024:

• Pension Calculation: Your pension will be based on the average of your pensionable salary for the last 24 months before retirement, multiplied by 70%.
• Net Pension: This amount (Gross Pension) will be added to any ad-hoc increases you receive. Your first Net Pension will be considered your Baseline Pension.
• Future Increases: Similar to pre-July 2024 retirees, your Baseline Pension will be used to calculate any future ad-hoc increases. It will also be reviewed every 3 years for potential adjustments.

Annual Increase:

• All pensions, regardless of retirement date, will be subject to an annual increase based on 80% of the average inflation rate over the past two years (as measured by the Consumer Price Index announced by the State Bank of Pakistan).

Early Retirement Penalty:

• If you retire before the age of 60 (or before completing the required service time for your rank in the armed forces), you will face a penalty. This penalty is 3% of your Gross Pension for each year remaining until you reach 60 (or complete your service requirement). The maximum penalty is 20% of your Gross Pension.

Multiple Pensions:

• You are generally only entitled to one pension. However, if both spouses were government servants, both can receive their own pensions.

Family Pension:

• The system differentiates between Ordinary Family Pension and Special Family Pension.
  • Ordinary Family Pension: This is 75% of the deceased pensioner’s last drawn salary, payable to the spouse until they die or remarry. After the spouse’s death, eligible daughters can receive it for 10 years. Disabled children can receive it for life.
  • Special Family Pension: This is 50% of the deceased pensioner’s last drawn salary, payable to the spouse until death or remarriage. After the spouse’s death, eligible family members (including disabled children) can receive it for a specific period (25 years for other eligible members, lifetime for disabled children).

Re-employment After Retirement:

• If you choose to re-employ after retirement or reaching the age of 60, you cannot receive both your pension and your new salary. You can choose to receive either one.