In a move aimed at alleviating the financial strain on the national budget, the Pakistani government is exploring a substantial reform of its pension policy. Sources reveal that the administration is contemplating a significant shift from traditional lump sum pension increases for retired public sector employees to a system where pension adjustments are linked directly to inflation data.
Under the proposed policy change, pensions would be adjusted based on inflation rates from the past two years. This adjustment is expected to result in a proposed 80% increase in pension payments. The new approach is designed to address the growing financial burden of pensions on the national budget, which has allocated a substantial Rs 1,014 billion for pensions in the current fiscal year.
The government’s strategy aims not only to manage the rising pension costs but also to control inflation and bring it down to single digits in the next fiscal year. The shift is in line with broader economic reforms intended to stabilize and strengthen the country’s financial health.
This proposed change comes from recommendations by the Pay and Pension Commission 2020. The commission has suggested linking pension increases to inflation data provided by the State Bank of Pakistan (SBP). This linkage is intended to ensure that pension adjustments reflect real economic conditions, potentially offering a more predictable and manageable approach to pension spending.
The proposed reform is part of a larger effort by the government to overhaul the pension system. Recent notifications from the Ministry of Finance detail several key amendments to the pension rules, which were also recommended by the Pay and Pension Commission 2020.
Key amendments include:
- Limitation of Family Pension: The government has decided to limit family pensions to a period of 10 years following the death of the retired employee.
- Eligibility for Pension Transfer: In cases where a pensioner passes away, only legal heirs will be eligible to receive the pension transfer.
- Lifelong Pensions for Disabled Children: Lifelong pensions will be provided to disabled children of deceased pensioners, ensuring continued financial support for those with special needs.
These reforms are expected to bring significant changes to how pensions are administered and distributed, reflecting ongoing efforts to modernize and streamline the public sector’s financial obligations. The government anticipates that these measures will help stabilize the pension system while addressing long-term sustainability issues.
As the government moves forward with these proposed changes, further details and official guidelines will be released to clarify how the new pension adjustments will be implemented and how they will impact retired public sector employees.
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