Islamabad: The federal government has officially announced that retired government employees, whether rehired on a contractual or permanent basis, must now choose between receiving a salary or a pension — they will no longer be entitled to claim both simultaneously.
According to reports, a notification issued by the Regulation Wing of the Ministry of Finance states that if any federal pensioner is re-employed after retirement at the age of 60, regardless of whether the employment is regular, contractual, or through any other mode, they will have to choose between retaining their pension or receiving a salary during the period of reemployment.
Previously, re-employed government officers were able to draw both a salary and a pension at the same time, with some even receiving multiple pensions. This practice not only placed a heavy financial burden on the public treasury but also hindered the promotion prospects of other employees.
The new move is part of broader pension reforms aimed at managing the rising pension liabilities and fulfilling a key requirement of the International Monetary Fund (IMF) program. Although initially announced by then-Finance Minister Ishaq Dar during the 2022-23 budget, the implementation had been delayed until Finance Minister Muhammad Aurangzeb reaffirmed the decision in the last budget, ahead of signing a new IMF program.
Sources indicate that one of the key decisions under these reforms — the introduction of a Contributory Pension Scheme for armed forces personnel — might be postponed until 2026, despite a notification setting its enforcement from June 2025.
Last September, the government issued a notification introducing a contributory fund scheme for new entrants into civil and military services. Under the scheme, federal employees will contribute 10% of their basic salary, while the government will contribute 20%. As per the notification dated September 3, 2024, this scheme will apply to civil servants recruited after July 1, 2024, and to armed forces personnel appointed after July 1, 2025. The government has allocated Rs 10 billion for the pension fund in the 2024-25 budget.
This scheme, introduced on the advice of international lenders, particularly the World Bank, aims to curb the escalating pension liabilities. The government clarified that the new scheme would not affect current employees and would help slow the future growth of pension-related obligations.
For comparison, the federal government’s pension expenditure is estimated to exceed Rs 1 trillion this fiscal year, up approximately 24% from Rs 821 billion in 2024. Pension obligations for the armed forces alone are expected to rise from Rs 563 billion to Rs 662 billion, an 18% increase, while civilian pension costs are projected to slightly decline from Rs 228 billion to Rs 220 billion, a 3.5% reduction.
In January this year, further pension reforms were announced, including the discontinuation of multiple pensions and a change in the calculation of pensionable benefits — shifting from the last drawn salary to the average salary over the last 24 months before retirement.
It was also notified that if an individual becomes eligible for more than one pension, they would be allowed to choose only one. The notification made it clear: “When a federal government employee becomes entitled to a pension, he/she shall not be eligible to receive another pension.”
