Pakistan Government Implements Pension Reforms to Meet IMF and World Bank Requirements
Pension Reforms in Pakistan
The Pakistan government has introduced new pension reforms to align with the requirements of international lenders like the International Monetary Fund (IMF) and the World Bank. The changes include a ban on receiving double pensions from the national treasury.
New Pension Calculation Method
The government will now calculate pension benefits based on the average earnings of the 24 months leading up to an employee's retirement. Previously, pensions were calculated based on the last 30 years of salary. A proposal to base pensions on 70% of the average earnings from the last 36 months was also considered.
Reasons for Reform
The federal government recognized the urgent need for pension reforms due to rapidly increasing pension liabilities, which are estimated to be between PKR 40 to 45 trillion. A senior official highlighted the necessity of these reforms to manage future obligations.
Regulations and Notifications
The Ministry of Finance's Regulation Wing issued notifications following the Pay and Pension Commission-2020's recommendations. Individuals eligible for multiple pensions can now only choose one. In-service federal employees cannot receive a pension while still employed, but their spouses can receive the pension in addition to their own pay or pension.
Future Pension Increases
Future pension increases will be based on the net pension at retirement, termed the baseline pension. Increases will be applied separately until further benefits are authorized by the federal government. The baseline pension will be reviewed every three years by the Pay and Pension Committee.
These changes are effective immediately, as announced by the ministry.
Doubts Revealed
Pension Reforms
Pension reforms are changes made to the rules and systems that govern how pensions are given to retired people. These changes are usually made to ensure that the pension system is fair and sustainable.
IMF
IMF stands for International Monetary Fund. It is an organization that helps countries by providing financial support and advice to improve their economies.
World Bank
The World Bank is an international organization that provides financial and technical assistance to developing countries to help them improve their infrastructure and reduce poverty.
Double Pensions
Double pensions mean receiving two pensions at the same time, usually from different sources. The reforms aim to stop this practice to save money.
PKR
PKR stands for Pakistani Rupee, which is the currency used in Pakistan. It is similar to how we use Indian Rupees (INR) in India.
Pension Liabilities
Pension liabilities refer to the amount of money that the government needs to pay to retired people in the form of pensions. It is like a big bill that the government has to pay over time.
Baseline Pension
A baseline pension is the basic amount of money that a retired person receives as a pension. Future increases in pension amounts will be based on this baseline.
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