Pakistan’s Ministry of Finance has unveiled a new pension formula by moving ahead with the implementation of the Defined Contribution Pension Fund Scheme 2024 for newly recruited federal government employees.
As part of the reform, the federal government has approved 16 pension fund managers to administer the new contributory pension system. According to an official notification, the approved fund managers have signed agreements with the government and are now authorised to manage and invest employees’ pension contributions.
Under the new formula, both the government and employees will contribute to individual pension accounts each month. Newly recruited federal employees will contribute 10% of their pensionable salary, while the federal government will contribute an additional 12%. Each employee will have a separate pension fund that will accumulate throughout their service.
Unlike the traditional pension system, the new model links retirement benefits to the total contributions made during an employee’s career and the returns generated through investments. The accumulated funds will be invested in approved financial instruments, with the pension amount at retirement depending on both the size of the fund and its investment performance.
Officials described the reform as a major milestone in Pakistan’s pension system, aimed at making retirement financing more sustainable. The contributory model is expected to reduce the government’s long-term pension liabilities by sharing responsibility between the state and employees while ensuring pension funds are managed professionally and transparently.
The Defined Contribution Pension Fund Scheme Rules 2024 will apply only to newly recruited federal employees. Existing pensioners and employees who retire under the previous pension system will continue to receive benefits under the existing legal framework.
The government has been working on pension reforms for several years due to the growing financial burden of the traditional pension system. Officials believe the new investment based pension model will strengthen the country’s public finances while providing greater long term financial security for future federal employees.
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