The Finance Division of Pakistan issued a notification about the Future Pension Increase Methodology for Federal Pensioners in 2025. The notification was issued on January 01, 2025.
Future Pension Increase Methodology
According to Pay and Pension Commission-2020, the future pension increase methodology will work as per the following:
- The net pension [Gross Pension less commuted portion of Pension] calculated at the time of retirement will be termed as baseline pension.
- Any increase in pension shall be granted on baseline pension.
- Each increase shall be maintained as a separate amount until the time, the Federal Government decides to review and authorize any additional pensioner benefits.
- The baseline pension will be reviewed by the Pay and Pension Committee every 3 years.
The current pension of the existing pensioner on the date of issuance of this O.M. shall be considered as baseline pension.
Provided further that baseline pension is deemed to include restored commuted portion of pension as and when restored.
According to the new notification, the existing instruction on the subject shall stand amended to the extent of the above with immediate effect.
What is Baseline Pension and Increase in Pension Method (Explanation)
In the future, there will be four points for pensioners introduced by the Finance Division. These are as follows:
Baseline Pension
The Finance Division has introduced a new term of pension which is Baseline Pension instead of net pension. Here we explain the baseline pension.
Pension is calculated as below:
Gross Pension = Average Basic Pay x Total Length of Service x 7/ 300
Amount for pension calculation = 35% 0r 25%
Amount for Commute calculation = 65% or 75%
The Federal Government has not yet clarified the distribution of 100% into 65% or 75% to 35% or 25%.
As per the above points, the baseline pension is as follows:
Baseline Pension = Gross Pension – Commuted Portion of Pension (35% or 25%)
Increase in Pension
If the pension is increased in the future, it will be on the base pension and not on the gross pension. Earlier, the Government used to give enhancements on net pension which was calculated as 65% of the pension at retirement and had many hikes of pension across the years. Now, it will increase the pension only on the initial pension or the relevant baseline pension.
Increase in Baseline Pension
The government will review every three years to increase the baseline pension. If the Pay and Pension Commission finds it necessary to increase the baseline pension, then the Government will increase the baseline pension.
Before the issuance of this Notification, the current pension that the pensioners are getting is now their baseline pension. That is good for the previous pensioners.
See the notification here:
Also Read:
- Notification of Multiple Pension by Federal Government
- Pension Reform Amendments 2024
- Leave Rules for Government Employees
