Finance ministry suggests lowering employees retirement age to 55

ISLAMABAD: The federal government is contemplating reducing the retirement age of its employees from 60 to 55 years, ARY News reported citing sources.

Prime Minister (PM) Shehbaz Sharif was also briefed on the proposal, suggesting the reduction in the employees’ retirement age but he did not give a positive response to it, the sources said.

No final decision has been made on the matter with further deliberation is underway.

“If the proposal to reduce employees retirement age is implemented, this change will only apply to civil servants,” the The Ministry of Finance sources said.

The reduction in retirement age could lead to the retirement of several bureaucrats, the sources claimed. The bureaucracy is reportedly not in favor of reducing the retirement age to 55 years .

Additionally, proposals to revise the frozen Federal Secretariat Allowance, which has been unchanged for over a decade, are also under consideration.

The Ministry of Finance is also working on the International Monetary Fund’s (IMF) proposal to include all serving civil servants in the Contributory Pension Scheme, similar to new recruits, the sources said.

Currently, the Contributory Pension Scheme is only applicable to new employees.

The Finance Ministry had earlier indicated that pensions could see an 80% increase to the inflation data of the last 2 years. The Pakistani government announced a 15% increase in pensions during the current fiscal year.

The new pension adjustment method is part of efforts to reduce the growing pension burden on the national budget. This fiscal year, the government allocated Rs 1,014 billion for pensions, as per official documents.

The proposal to link pension increases to inflation was initially suggested by the Pay and Pension Commission 2020. Inflation data to determine pension adjustments will be provided by the State Bank of Pakistan.

Earlier, the Sindh cabinet, in its meeting at the CM House approved the implementation of the Sindh Defined Contributory Pension Scheme 2024.

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The cabinet approved the insertion of a new subsection in the Section of the Sindh Civil Servant Act 1973.

According to the amendment, “an individual who is appointed or regularized as a civil servant on or after the commencement of the Sindh Civil Servant (Amendment) Act, 2024, will be considered a civil servant, except for pension and gratuity. Instead, they will participate in a Defined Contribution Pension Scheme as prescribed. In place of pension and gratuity, the civil servant will be entitled to receive the amount contributed by them, along with the contributions made by the government to their account in the mentioned fund, in the prescribed manner”.