New Pension Reforms 2023 in Pakistan (Explained)

The federal government has decided to make major amendments in the Pension Scheme 2023 to reduce the increasing burden of the pension payment bill to the retired employees. Here are the new pension reforms 2023 for government employees in Pakistan.

Pension Reforms 2023 for Government Employees

For new pension reforms, it is proposed to fix the period of family pension up to ten years after the death of the retired employees.

In case any child of the eligible retired employee becomes disabled, he/she will get family pension for an indefinite period.

The Finance Ministry sent the summary to the Prime Minister for approval. According to the copy of the summary available to the media, it is said in the summary that the pension bill has become unaffordable.

The Pay and Pension Commission gave its recommendations in 2020, in the light of which the government announced pension reforms, according to which amendments are being proposed in the pension scheme.

The calculation of their pension on retirement shall be based on seventy percent of the pensionable amount of the last thirty-six months of service and the amount of annual increase in the pension of the pensioners after retirement shall be set aside and this amount shall be set aside until such time as Until the government takes a decision on the revision of the authorized pensionary benefits.

The increase in pension will be in accordance with the rate of inflation, but this increase will be up to ten percent and the government will also adjust it according to the decrease in the rate of inflation. Government employees.


According to the terms and conditions, the maximum 25% of the raw pension can be commuted. In case of re-employment on regular basis on contract after retirement, the employee will be given the option to retain the pension or draw the salary of that employment.

Here are a summary of new and old pensions rules for government employees:

1. Abolition of more than one pension

Current Rule: If any government employee, after retirement, joins an other department then he is liable to get pension form both of the department.

Proposed Rule: The government employee has to choose between the two pension which ever is higher. His family will also be able to avail that pension which the employee is taking at the time of his death.

2. Family Pension is Limited to 10 Years

Current Rule: After the death of the pensioner his wife is eligible to avail the pension for her entire life. Even after the her death her divorced daughter or widow daughter can avail this pension.

Proposed Rule: After the death of the pensioner his wife is eligible to avail the pension for her entire life. But when she died then her divorced or widow daughter can avail this pension only for 10 years and after that pension will be stopped.

3. Annual Increment in the Pension

Current Rule: Increase in the pension of pensioners is announced on the occasion of budget. And this increment is calculated by adding all the previous increments. For example, firstly, if the pension is 20,000 rupees and there is an increase of 10%, then the pension of 2000 rupees will become 22,000 after the increase. So next year if there is another 10% increase then it will be taken out to 22,000 then the pension becomes 24200 after 2200 increase.

Proposed Rule: Under the proposed reforms, such increase in pension will be abolished. And the increase in pension will be given on the net pension at the time of retirement. Similarly, if the pension was Rs.20،000 in the first year and after 10% increase, the pension will be Rs.22،000 after Rs.2000. If there is another 10% increase in the next year, then this increase will be withdrawn at the time of retirement on net pension of Rs. 20,000.

4. Pension System

Current Rule: At present all government employees are recruited under the Pension cum gratuity Scheme 1954. In this scheme, the government offers GP fund plus gratuity to the recruited employee. Under which the employee is entitled to pension and gratuity after completing 25 years of service.

Proposed Rule: Under the new proposed pension reforms, the pension cum gratuity scheme of 1954 will be replaced by the contributory pension scheme and the old pension system will be abolished. In the new system, the government employee will contribute to the pension fund and the same amount will be contributed by the government. By investing this amount in an investment scheme, the annual profit will continue to accumulate in the employee’s account and this amount will be paid to him on the occasion of retirement.

5. Pension Formula

Current Rule: At the time of retirement value of pension is counted as per the last basic salary of the pensioner.

Proposed Rule: Under the new proposed pension reforms, the average basic pay of the last 36 months will be taken instead of the employee’s basic pay for drawing pension at the time of retirement.

6. Pension Commutation Rate

Current Rule: Under the current system, if this pension has two parts. 65% of the net pension, which is received in the form of monthly pension, while 35% of the pension is commuted.

Proposed Rule: In the new proposed reforms, there will be 25% commutation instead of 35% pension commutation.

7. Deduction in Pension

Current Rule: Under the existing pension system, the pension of employees who retire after qualifying service is not deducted. But in Punjab age of 55 with 25 years of service is required for voluntary retirement.

Proposed Rule: Government employees will be able to take EARLY retirement after 25 years of service, but this will be subject to a penalty deduction of three percent per annum during the period from 25 years of service to the age of retirement.

I hope you have understand these new proposed pension reforms 2023. If you have any question please leave it down in the comment section. If you like this article then follow us on our Facebook page and subscribe our YouTube channel as well. Thanks!

Also Read:


I am interested in writing content for educational purpose.

Notify of
Inline Feedbacks
View all comments
Would love your thoughts, please comment.x