ISLAMABAD – Pakistan’s pension system saw major amendments under Pay and Pension Commission of 2020 to deal with future increase in pension costs.
The incumbent government implemented new regulations restricting multiple pensions and limiting pension payments to family members to maximum of 10 years.
Under latest reforms, the gross pension amount will now be calculated as 70 percent of the average pensionable earnings received during the last 2 years of service before retirement.
Finance Division made following key amendments which will be effective from July 2024:
| Aspect of Pension | Details |
|---|---|
| Gross Pension Calculation | 70% of average salary over the last 24 months of service. |
| Voluntary Retirement Penalties | 3% annual pension reduction for employees retiring after 25 years, capped at 20%. Applies to armed forces and civil armed forces below prescribed rank. |
| Pension Increment | Based on net pension at retirement (baseline pension), reviewed every three years. |
| Ordinary Family Pension | Available for 10 years after spouse’s death or for life for disabled children. For other children, until they turn 21 or for 10 years, whichever is later. |
| Special Family Pension | Available for 25 years after spouse’s death or for life for disabled children. 50% of last drawn pension, transferable to eligible heirs. |
| Re-employment | Pensioners re-employed after 60 can choose between retaining pension or drawing salary from new employment. |
| Multiple Pensions | Individuals can only draw one pension; in-service employees can receive spouse’s pension. |
| Annual Surge | 80% of average inflation rate over last two years, based on Consumer Price Index (CPI). |
