To save Rs. 1 trillion annually on pension bills, the federal government plans to bring the retirement age for government employees from 60 to 55.
Reported Dawn, the government hopes this will bring about a reduction of around Rs. 50 billion annually in long-term pension liabilities.
The plan reduces the pension payouts for a shorter time, but there are certainly upfront costs due to severance and early retirement.
Over the past decade, the federal government‘s pension increases with tax revenues jumped fivefold compared with just 2.7 times in tax revenues: from Rs. 164 billion in 2011 to Rs. 988 billion in 2021.
Also Read: Afghan Officials Urge Future Participation in COP29
The other reforms are the introduction of future contributory pension schemes for employees. Public sector corporations and regulatory bodies will also be required to effect the same retirement age cut with regard to severance costs covered by them.
Therefore, while this is in concert with practices in neighboring countries such as India, Malaysia and Sri Lanka, where retirement ages range between 55 and 60, concern remains about the loss of experienced staff and possible effects on efficiency from this workforce.
If it comes to fruition, the government believes it will cut back immediate pension expenditure in the long run.