Pakistan Introduces New Pension System; Armed Forces Exempt for Now
Islamabad: The federal government has officially implemented a new pension framework titled the **“Federal Government Defined Contribution Pension Fund Scheme Rules 2024,”** marking a major reform in Pakistan’s pension structure. Under this system, the traditional pension model for civil servants will be replaced with a **contributory scheme** — a shared pension fund system between the government and employees.
According to a notification issued by the **Ministry of Finance**, the new system was approved on **August 27, 2025**, and has now been circulated to all federal ministries, divisions, and departments for implementation.
### **How the new system works**
Under the new pension scheme, federal employees will now contribute a portion of their monthly salary toward their pension fund, while the government will also contribute a share.
As per the notification:
* The **government (employer)** will contribute **12% of the employee’s pensionable salary** each month.
* The **employee** will contribute **10% of their salary** to the pension fund.
Both contributions will be deposited into a **dedicated pension fund**, which will be invested in various financial instruments. Upon retirement, the **accumulated savings and investment returns** will determine the employee’s pension benefits.
### **Exemption for Armed Forces**
Sources confirmed that the new pension system currently applies **only to civil servants**, while the **Pakistan Armed Forces** are temporarily exempt. For military personnel, both employer and employee contribution rates are set at **zero** for now, indicating that the system’s implementation for the armed forces will follow at a later stage.
### **Objective of the reform**
Finance Ministry officials said the reform aims to **reduce the government’s growing pension burden**, ensure **financial sustainability**, and bring Pakistan’s pension system **in line with international standards**.
In recent years, pension payments have consumed a significant portion of the national budget. The new contributory model is expected to gradually reduce this strain, making pensions **self-funded and performance-based** through investment growth.
### **Implementation directives**
The Ministry of Finance has sent directives to the **Auditor General of Pakistan**, **Accountant General Pakistan Revenues (AGPR)**, **State Bank of Pakistan**, and all major ministries — including **Defence, Education, Railways, Energy, IT, and Climate Change** — for immediate implementation of the new pension rules.
