ISLAMABAD: The federal government has introduced a new contributory pension fund scheme to reduce the rising burden of pension expenses.
The Finance Ministry has also issued a notification in this regard.
According to the ministry, federal employees will now contribute 10 percent of their salary to the pension fund, while the government will add a 12 percent contribution. Under the new system, a total of 22 percent will be deposited into the pension fund.
The new scheme will apply to employees recruited from July 1, 2024, while existing government employees will not be included in it.
For armed forces personnel, the scheme is expected to take effect from July 1, 2025.
The Finance Ministry said that the government has allocated Rs10 billion for the establishment of the new pension fund. It added that pension liabilities surged to Rs10.55 trillion in fiscal year 2024-25, while the pension bill for armed forces alone is expected to reach Rs742 billion in 2025-26.
The notification clarified that employees will not be allowed to withdraw funds from their pension accounts before retirement.
However, upon retirement, they will be permitted to withdraw up to 25 percent of the amount.
The ministry further stated that a non-banking finance company will be established to manage the pension fund.
It added that the new system has been introduced on the advice of international financial institutions, particularly the World Bank.
