Future Increase Methodology in Pension: Federal Government Notification

The Federal Government of Pakistan, through the Finance Division (Regulations Wing), has issued a new notification outlining the methodology for future increases in pensions. This significant update is based on the recommendations of the Pay and Pension Commission 2020 and introduces key reforms in the pension structure for government employees.

Notification Details

• Notification Number: F.No. 9(3)R-6/2024-403
• Date: 1st January 2025
• Issued By: Finance Division (Regulations Wing), Government of Pakistan

Key Highlights of the Notification

1. Baseline Pension Definition

• The net pension (gross pension minus commuted portion of pension) calculated at the time of retirement will now be termed as the baseline pension.

2. Pension Increase Methodology

• Any increase in pensions will be applied to the baseline pension.
• Each increment will be maintained as a separate amount. This ensures transparency and ease of record-keeping.

3. Review by Federal Government

• The Federal Government retains the authority to review and authorize any additional pensionary benefits over time.

4. Periodic Review of Baseline Pension

• The baseline pension will be reviewed by the Pay and Pension Committee every three years to ensure relevance and adequacy.

Additional Provisions

• The baseline pension of current pensioners as of 1st January 2025 will include any restored commuted portions of their pensions.
• Existing instructions have been amended to reflect these changes, effective immediately.

Significance of the Reform

This reform aims to streamline the pension system while ensuring fairness and financial sustainability. It reflects the government’s commitment to implementing a structured and efficient.