Federal and Punjab Govts Plan Big Switch to New Pension System By July

Both the federal government and the provincial government of Punjab are working with the Securities Exchange Commission of Pakistan (SECP) to launch a voluntary pension scheme (VPS) for its employees by July 1, 2024, official sources told ProPakistani. Sources said authorities are working on a VPS for both federal and Punjab government employees to replace the current traditional pension system starting July 1 onwards. The Ministry of Finance has worked with the SECP to develop the new system. The VPS has been a longstanding agenda set by the International Monetary Fund (IMF) for Pakistan to help manage its finances. The VPS, already operational in Khyber Pakhtunkhwa, enables employers in both the public and private sectors to make fully funded pension contributions to their employees. SECP officials said the EPS could be rolled out in the fiscal year 2024-25 for all newly recruited provincial employees. Abdul Rehman Warraich, Commissioner of SECP, has emphasized the underlined pension reforms, stressing their importance not only for government personnel but also for the private sector. The federal government’s pension bill surged to Rs. 480 billion in 2021, with the unfunded liability currently standing at approximately Rs. 3 trillion. Similarly, provincial governments have witnessed significant hikes in pension bills from Rs. 75 billion in 2011 to Rs. 500 billion in 2020. The above-mentioned reforms expand inclusiveness by enabling non-resident Pakistanis to save for retirement in the country, aligning Pakistan with international pension solutions like the 401(k) retirement plans in the US. Under this scheme, employees will enjoy continued pension benefits even while changing jobs. Presently, the country boasts 43 operational pension funds with a combined investment of Rs. 61 billion. Khyber Pakhtunkhwa took the first step in investing in pension funds two years ago, with 21 funds dedicated to government employees. Building on this, the federal and Punjab governments want to launch their own VPS, aligning with IMF directives to curb pension costs.