Pakistan announces IMF-backed pension system reforms

Pakistan has announced reforms to its pension system, following the recommendations of the International Monetary Fund (IMF) aimed at curbing increasing expenses.

According to an Office Memorandum issued by Pakistan's Ministry of Finance, retired employees will now only be eligible to receive a salary or pension upon new employment.

The document states that if a retiree is entitled to more than one pension, they will have to opt to draw only one.

For in-service federal government employees eligible for multiple pensions, the same restriction applies.

Additionally, the memorandum stipulates that an in-service employee's spouse will be eligible for the pension of their spouse in addition to their own pay or pension.

The Finance Division has also notified a new methodology for future pension increases.

It has been decided that the net pension (gross pension minus the commuted portion of the pension) calculated at retirement will be termed as the baseline pension.

Based on the recommendations of the Pay and Pension Commission 2020, any increase in pension will be granted on this baseline, with each increase maintained as a separate amount until the federal government reviews and authorizes additional pensionary benefits.

The baseline pension will be reviewed by the Pay and Pension Committee every three years.

In another notification, the Finance Division announced that pensions will be calculated based on the average of pensionable emoluments drawn during the last 24 months of service prior to retirement.

These reforms mark a significant shift in Pakistan's approach to managing its pension liabilities, addressing a critical fiscal challenge highlighted by the IMF.