According to high-ranking sources, the Finance Ministry will abolish the lump sum pension Increase for retired civil servants and in its place will apply an 80% pension increase during the next two years depending on the relevant inflation. This move is in line with the government’s policy of relating pension increases to inflation because of the overall effort to deal with the rising pension load.
The government has allocated Rs. 1,014 billion for pensions in the ongoing financial year. It had given a flat 15 percent increase in pension payouts in the beginning that was approved by the Ministry for the retirees. However, under the new proposal, the future increments would be precisely worked out based on inflation data to be provided by the State Bank of Pakistan. The approach is based on recommendations of the Pay and Pension Commission 2020 that suggested adjustment of pensions in line with inflation.
The Finance Ministry is thus trying to keep inflation in check and bring it down to single digits in the forthcoming fiscal year. Sources also indicated that the lump sum increases in pensions for retired public employees may be phased out.
Also, on September 11, three major amendments to the pension rules were issued by the Finance Ministry. The amendments further restrict the dispensation of family pensioners to a period of 10 years and provide that, in case a pensioner dies, pension transfers shall be paid to only legal heirs. The spouse shall continue to draw a pension up to 10 years from the date of the death of the pensioner, while a disabled child shall be entitled to a lifetime pension.
These changes put the pension system on a more sustainable footing to reflect inflationary trends and reduce the fiscal load on the national budget.
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