- Pension reforms are needed amid growing future obligations.
- Center, the provinces’ liability on the pension bill is close to Rs40-45tr.
- Retirement emoluments to be calculated 24 months before retirement.
ISLAMABAD: In line with the demands of foreign creditors, namely the International Monetary Fund (IMF) and the World Bank (WB), the government has imposed a ban on receiving double pension from the national treasury, News reported Thursday.
Currently, the gross pension is calculated on the basis of the last 30 years of salary received. However, the government has changed this formula and pensions will now be calculated based on 24 months preceding retirement.
This measure was taken by the federal government while recognizing that changes in pension systems are an urgent need of the moment, as pension commitments are experiencing a sharp increase.
It was proposed that employees would be entitled to a gross pension based on 70% of the average pensionable emoluments received during the last 36 months of service prior to retirement.
A senior official told the newspaper late Wednesday that the pension reforms were necessary because future obligations were growing, as was the debt burden. The pension bill liabilities of the Center and four provinces are estimated at Rs 40-45 trillion, considering the size of the public sector at current levels.
The Regulatory Wing of the Ministry of Finance has issued various notifications stating that on the recommendations of the Wages and Pension Commission-2020, it has been decided that henceforth, in case a person is entitled to more than one pension, that person would only be allowed to choose to benefit from one of the pensions, provided that: (I) when a serving federal government employee becomes eligible for a pension, that employee will not be eligible to receive that pension and (ii)The serving/retired spouse will be entitled to their spouse’s pension in addition to their own salary/pension.
According to another notification relating to calculation of emoluments for pension purposes, it was decided that pension would be calculated on the basis of average pensionable emoluments received during the last 24 months of service preceding retirement.
According to another notification, it was decided that the future methodology for increasing pensions would be as follows:
a) The net pension (gross pension minus the actuarial part of the pension) calculated at the time of retirement will be called the basic pension. Any pension increase will be granted on the basic pension.
c) Each increase will be maintained as a separate amount until the federal government decides to review and authorize any additional retirement benefits.
d) The basic pension will be reviewed by the Remuneration and Pensions Committee every three years. The current pension of existing retirees will now be considered the basic pension. The basic pension is deemed to include the purchased part of the pension restored as recovery occurs. The existing instructions are amended with immediate effect, the ministry said.