The federal government has introduced a “Contributory Pension Fund Scheme” for new employees appointed on or after July 1, 2024, on a regular basis. The aim is to manage large pension payments more efficiently by establishing an autonomous fund, potentially easing current public expenditures.
The International Monetary Fund (IMF) has pressured the government to reform the public sector pension system to alleviate financial strain on ongoing expenses.
Under the new scheme, federal employees will contribute 10% of their base salary, while the government will contribute 20%, according to a statement from the finance ministry.
The statement also indicated that the Contributory Pension Fund Scheme will apply to all federal civil employees, including civilians paid from defense estimates, who are appointed on a regular basis on or after July 1, 2024. Moreover, the scheme will extend to members of the armed forces appointed on or after July 1, 2025.
The government has allocated Rs10 billion for the pension fund in the 2024-25 budget. This new scheme, however, does not apply to current employees. The government believes the Contributory Pension Fund will help slow the growth of pension liabilities in the future.
For the current fiscal year, the federal government is projected to spend Rs1.014 trillion ($3.65 billion) on pensions, a rise from Rs821 billion ($2.96 billion) the previous year. This includes pension liabilities for the armed forces, which increased by approximately 18% to Rs662 billion ($2.38 billion) from Rs563 billion ($2.03 billion) the previous fiscal year.
