Islamabad:
The federal government has officially implemented the contributory retirement plan for civil servants, marking a major reform of the pension system.
Under the new contributory retirement fund rules, federal employees will now contribute 10%of their salary to their retirement fund to qualify for a 12%government contribution, which makes the 22%total contribution.
This scheme replaces the former retirement system for newly recruited employees and the Department of Regulation of the Ministry of Finance published the Pension Fund regime defined by the Federal Government (FGDC)
2024, formulated under the Public Finance Management Act 2019.
The scheme will be regulated under the 2005 rules of the voluntary pension system and non -banking financing companies and the regulations of entities notified 2008, to replace the rules of August 2024 which had established the government’s contribution to 20%.
The new rules apply to civilian employees recruited on July 1, 2024, including those of Civil Defense. The rules for the staff of the armed forces will take effect from July 1, 2025 but are still unanswered.
The government allocated 10 billion rupees for the year 2024-25 and 4.3 billion rupees for the year 2025-2026 to support the system, which was introduced on the recommendations of the International Monetary Fund (IMF) and the World Bank to reduce the increasing budgetary burden of pensions.
Current employees will not be affected. However, the reform aims to slow the increase in retirement spending, estimated at RS1.05 Billions for 2024-25, up 29% compared to last year.
Under the new rules, authorized retirement fund managers will manage the fund. The general accountant of Pakistan Office will process deposits, the holding of files and transfers.
Employees will not be authorized to withdraw funds before retirement; Retired, they can withdraw up to 25%, the rest invested for 20 years or up to 80 years.
The Ministry of Finance will contract retirement fund managers supporting electronic transfer systems and will ensure insurance coverage in the event of death or disability. A non -banking financing company (NBFC) will supervise the implementation and monitoring of the system.
This marks a major passage of the service model defined to a defined contribution system – aimed at financial sustainability and better retirement security for future government employees.
