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

The federal government has banned double pensions for its employees to meet conditions set by the International Monetary Fund (IMF), the World Bank, and other creditors. Pension calculations will now be based on the average emoluments drawn during the last 24 months of service prior to retirement, replacing the earlier formula that considered salaries from the last 30 years. Under the new rules, individuals eligible for more than one pension will be required to choose one. However, a pensioner or in-service spouse will remain entitled to the pension of their partner. This means that spouses will remain eligible for their partner’s pension in addition to their own. The methodology for future pension increases has also been revised. Increases will now be defined as the gross pension minus the commuted portion at retirement. These increments will be maintained as separate amounts until further government review, with a comprehensive reassessment of the baseline pension every three years. Pensions will now be calculated based on the average salary of the last two years of service, replacing the previous method based on the last drawn salary. Annual compounding of pensions has been discontinued. 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, 66% of which will go to the Armed Forces. The Regulation Wing of the Ministry of Finance issued notifications to implement these reforms. The federal government has emphasized that these changes are critical to managing escalating pension liabilities, which mirror the country’s rising debt burden.