IMF, WB demand: Ban imposed on govt employees' double pension

ISLAMABAD: The government has imposed a ban on receiving double pensions from the national exchequer to comply with the demands of multilateral creditors, including the International Monetary Fund (IMF) and World Bank.

Additionally, the government has decided to base pension emoluments on the last 24 months of service before retirement.

Previously, a proposal suggested that employees would be entitled to a gross pension based on 70% of the average pensionable emoluments drawn during the last 36 months of service. However, the pension formula has now been revised, and pensions will be calculated based on the final 24 months of service instead of the last 30 years of salary.

This move by the federal government comes in response to the growing pension liabilities, which are increasingly becoming a financial burden. Senior officials explained that pension reforms are essential as future obligations are rising, much like the increasing debt burden. The combined pension liabilities of the federal and provincial governments are estimated to range between Rs40 trillion and Rs45 trillion, considering the size of the public sector.

The Ministry of Finance’s Regulation Wing issued several notifications outlining these changes, based on the recommendations of the Pay and Pension Commission-2020. According to these new rules:

1. If an individual qualifies for more than one pension, they will only be allowed to choose one pension.

   • A serving federal government employee who becomes eligible for a pension will not receive that pension while still in service.
   • A pensioner’s spouse may receive their spouse’s pension in addition to their own pay or pension.

2. Pension emoluments will be calculated based on the average pensionable emoluments from the last 24 months of service before retirement.

3. The future increase in pensions will follow a specific methodology:

   • The net pension (gross pension minus the commuted portion) at the time of retirement will be termed the baseline pension. Any future increases will be based on this baseline pension.
   • Each increase will be treated as a separate amount until the federal government decides to authorize any additional pension benefits.
   • The baseline pension will be reviewed by the Pay and Pension Committee every three years. Existing pensions will now be considered the baseline, including any restored commuted portion once applicable.

These changes are being implemented immediately, and existing instructions are amended accordingly.