Karachi:
The federal government has introduced major pension reforms within the framework of the 2025-26 budget, aimed at rationalizing public spending and reducing the growing budgetary charge posed by the existing pension system.
Unveiling on Tuesday the 2025-26 budget in the National Assembly, the Minister of Finance, Muhammad Aurangzeb, announced that retirement officials who joined government service should now choose between their pension or the new salary, ending the practice of two financial advantages.
Among the new measures, the government also imposed a 5% tax on high income pensioners – defined as those under the age of 70, an annual pension exceeding 10 million rupees. However, the Minister said that low -income pensioners will remain exempt from this tax.
The duration of family pensions was capped at 10 years after the death of the retiree spouse, and several pensions will no longer be authorized.
Aurangzeb said that for decades, successive administrations had changed the retirement system by decrees, resulting in a disproportionate burden for the national treasury. Current reforms, he said, aim to rationalize the structure of pensions and to align future increases with the consumer price index (IPC) to ensure sustainability.
He also declared that premature pensions will be discouraged in the new political framework, strengthening the government’s commitment to a financially viable retirement system.
