Govt launches new pension rules — Check what’s changed

The federal government has rolled out a new contributory pension fund scheme to address the rapidly increasing pension liabilities, which have reached Rs10.55 trillion in 2024–25.

The Ministry of Finance announced that the reform aims to make the pension system sustainable while reducing the fiscal strain on the national budget.

According to the Ministry of Finance notification, the new contributory pension fund will replace the traditional pension model for newly recruited federal employees starting July 1, 2024.

Under the new system, a total of 22% of an employee’s salary will be contributed to the pension fund — 10% by the employee and 12% by the government. The fund will be managed by a newly established non-banking finance company (NBFC) under the Finance Ministry’s supervision.

The Finance Ministry clarified that this new model will not apply to existing government employees. Instead, it will cover only those hired after July 1, 2024.

For the armed forces, implementation is expected to begin from July 1, 2025. The government has earmarked Rs10 billion to kickstart the new pension fund.

Employees will not be allowed to withdraw money from their pension accounts before retirement. However, upon retirement, they may withdraw up to 25% of the accumulated amount, while the remaining balance will continue to generate post-retirement benefits.

This structure mirrors international contributory systems, promoting both savings discipline and financial security for retirees.

According to the Ministry, the scheme was developed with guidance from international financial institutions, including the World Bank, as part of broader fiscal reform initiatives.

Officials stated that pension liabilities have become one of the largest components of current expenditure, with armed forces’ pension costs alone projected to reach Rs742 billion in 2025–26.