Federal Government Launches New Contributory Pension Scheme for Employees

Islamabad: The federal government has introduced a major pension reform for civil servants, officially implementing the **Federal Government Defined Contribution (FGDC) Pension Fund Scheme Rules 2024**, marking a significant shift from the traditional defined benefit system to a contributory pension model.

According to the new scheme, federal employees will now **contribute 10% of their basic salary** toward their pension fund, while the **government will contribute 12%**, creating a combined contribution of **22%** under the newly established FGDC Pension Fund.

The **Finance Ministry’s Regulation Department** issued the FGDC Pension Fund Scheme Rules 2024, developed under the **Public Finance Management Act 2019**. The scheme will be regulated under the **Voluntary Pension System Rules 2005** and the **Non-Banking Finance Companies and Notified Entities Regulations 2008**.

This initiative replaces the August 2024 directive, which had set the government’s contribution at 20%. The new scheme applies to all **civil servants recruited on or after July 1, 2024**, including civil defense employees, while for the **armed forces**, it will come into effect from **July 1, 2025** (currently pending implementation).

In the **2024–25 federal budget**, the government allocated **Rs 10 billion** to support the new system, with an additional **Rs 4.3 billion** set aside for **2025–26**.

Sources reveal that the new scheme was introduced **on the recommendation of the International Monetary Fund (IMF)** and the **World Bank** to address Pakistan’s rapidly increasing pension burden, which has been identified as a major fiscal challenge.

The **federal government’s pension bill** for FY2024–25 is projected to reach **Rs 1.05 trillion**, a **29% increase** from **Rs 821 billion** in FY2023–24. Pension liabilities for the **armed forces** are expected to climb to **Rs 742 billion** in FY2025–26, up **32%** from **Rs 563 billion** in FY2023–24.

Under the new rules, only **authorized pension fund managers** will handle the funds. The **Accountant General’s Office** will oversee recordkeeping and transfer monitoring. Employees will not be allowed to withdraw their contributions before retirement. Upon retirement, they may **withdraw up to 25%** of their savings, while the remainder will stay invested under the **Voluntary Pension System Rules 2002** for at least **20 years or until the age of 80**, whichever comes first.

Each employee’s **salary slip** will detail the individual and government contributions and the total accumulated amount. The government’s portion will be budgeted annually, and agreements will be made with **NBFCs** (Non-Banking Finance Companies) that support **electronic transfer systems** and **insurance coverage** in case of death or disability.

The new contributory scheme represents a **landmark shift** in Pakistan’s pension system — from a **defined benefit** to a **defined contribution** model — aiming to enhance **financial sustainability** and ensure **greater retirement security** for future federal employees.