Budget Blow for High-Pension Retirees Under 70; New Tax and Pension Reforms Introduced

Islamabad – Federal Finance Minister Muhammad Aurangzeb has announced a proposed 5% tax on retirees under the age of 70 who receive annual pensions exceeding Rs. 10 million, as part of major pension reforms introduced in the 2025–26 federal budget.
During his budget speech in the National Assembly, the finance minister clarified that low and middle-income pensioners will remain exempt from this tax.
A 7% increase in pensions for retired government employees was also proposed.
Minister Aurangzeb explained that over the past few decades, executive orders have led to irregular modifications in the pension system, putting a significant strain on the national treasury. To address this, the government has initiated key structural reforms to ensure long-term sustainability.
Key Pension Reforms Announced:
Early retirement discouraged through policy adjustments
Pension increases to be linked with the Consumer Price Index (CPI)
Family pension duration limited to 10 years after the spouse’s death
Elimination of multiple pensions for a single retiree
Retired individuals rehired in government roles must choose between receiving a salary or a pension, but not both
These reforms aim to streamline the pension structure, reduce unnecessary fiscal burdens, and ensure fairness across the retirement system.