In a landmark move, the federal government has officially launched the Federal Government Defined Contribution Pension Fund Scheme Rules, 2024, marking a major shift from Pakistan’s long-standing non-contributory pension model to a contribution-based system.
The new framework, notified through SRO 1728(I)/2025 on August 27, 2025, has been circulated across all federal ministries and divisions for immediate implementation.
💼 Key Highlights of the New Pension Scheme
Under the revised system, pension benefits for future federal employees will depend on monthly contributions from both the employer and the employee — a move designed to reduce fiscal pressure on the government and ensure long-term sustainability.
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Employer contribution: 12% of pensionable pay
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Employee contribution: 10% of pensionable pay
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Armed forces: Currently exempt; contributions remain at 0%
All contributions will be accumulated in a dedicated pension fund, and future payouts will depend on investment returns generated from the pooled assets.
📊 Why the Reform Was Needed
Pakistan’s pension liabilities have soared in recent years, crossing Rs. 1 trillion in FY25, including military pensions. The previous “pay-as-you-go” model placed heavy strain on the national budget, prompting urgent reform under the government’s IMF-backed fiscal sustainability commitments.
Officials said the contribution-based model would not only make the pension system self-financing but also promote transparency and accountability in fund management.
🏛️ Implementation and Oversight
The notification has been dispatched to:
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Auditor General of Pakistan (AGP)
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Accountant General Pakistan Revenues (AGPR)
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State Bank of Pakistan (SBP)
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All relevant ministries including Defence, Education, Railways, Energy, IT, and Climate Change
These departments are now required to realign their administrative and payroll systems to comply with the new pension structure.
⚙️ A Structural Shift in Pakistan’s Fiscal Policy
Experts describe this move as one of the most significant public financial reforms in decades. With the old pension model proving unsustainable, the new system introduces a shared-responsibility framework, ensuring both the government and employees contribute toward retirement benefits.
