Govt Imposes Another Condition on Pensions to Meet IMF’s Demands

The federal government has prohibited double pensions for its employees in order to comply with the conditions set by the International Monetary Fund (IMF), the World Bank, and other creditors.

Pension calculations will now be based on the average emoluments earned during the last 24 months of service before retirement, replacing the previous formula that considered salaries from the last 30 years.

Changes in Pension Law—Who Gets What?

Under the new regulations, individuals eligible for more than one pension will be required to choose one. However, pensioners or their in-service spouses will still be entitled to their partner’s pension in addition to their own. This means that spouses can retain their partner’s pension while also receiving their own.

The methodology for future pension increases has also been updated. Increases will now be calculated as the gross pension minus the commuted portion at retirement. These increments will be treated as separate amounts until further review by the government, with a full reassessment of the baseline pension every three years.

Additionally, pensions will now be based on the average salary of the last two years of service, replacing the previous method that considered the last drawn salary. Annual compounding of pensions has been discontinued, and future increases will be calculated separately from the baseline pension, similar to ad-hoc salary adjustments.

For the current fiscal year, Rs. 1.014 trillion has been allocated for pensions, with 66% of this amount designated for the Armed Forces.

To implement these reforms, the Regulation Wing of the Ministry of Finance has issued the necessary notifications. The federal government has emphasized that these changes are essential for managing the growing pension liabilities, which are contributing to the country’s increasing debt burden.