The federal government of Pakistan is planning to introduce a new Defined Contribution Pension Fund scheme for federal employees.
The authorities have asked all of the ministries, divisions and departments to prepare employee data and complete administrative arrangements for the reform.
The scheme represents a major shift from the existing defined-benefit pension system, under which pension payments are largely met from government revenues after an employee retires.
Under the new system, both employees and the government will contribute to an individual pension fund.
For eligible civilian federal employees, the employee contribution will be 10% of pensionable pay, while the government will contribute 12%, bringing the combined contribution to 22%.
The contributions will be accumulated in individual pension funds and invested, with the eventual retirement benefit linked to the funds built up during an employee’s career.
The new rules apply to federal employees who were inducted into government service from 1 July 2024, according to the information provided.
The Finance Ministry issued the Federal Government Defined Contribution Pension Fund Scheme Rules, 2024 through SRO 1728(I)/2025 on 27 August 2025.
The rules were subsequently circulated to federal ministries and institutions with instructions for implementation.
As part of the latest preparations, ministries and divisions have been directed to identify employees covered by the scheme and provide updated information to the Accountant General Pakistan Revenues (AGPR) within 15 days.
Each organisation has also been asked to nominate an officer of Grade 17 or above as a focal person to coordinate implementation and pension-fund matters.
The Finance Ministry’s Human Resources Wing is overseeing the administrative preparations, while the Controller General of Accounts and AGPR are involved in compiling employee information by ministry, division, department and grade.
The government has been seeking to reform the pension system as pension expenditure continues to increase and place pressure on public finances.
Under the old defined-benefit model, the government remains responsible for pension payments to eligible retirees. The new contribution-based system is intended to create a funded mechanism in which contributions are accumulated and invested over an employee’s working life.
Finance Minister Muhammad Aurangzeb has previously highlighted the rising pension bill as a major fiscal challenge, saying that the federal pension burden had reached around Rs1 trillion and was continuing to grow.
The government believes shifting new civilian employees to a defined-contribution model will help contain the growth of future pension liabilities and improve the sustainability of public finances.
The reform is not expected to reduce government pension expenditure immediately.
Existing pensioners will continue receiving their benefits under the previous rules.
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