Sindh cabinet amends pension scheme

KARACHI, Jan 18,2022- Sindh cabinet amended the pension scheme. At present an employee can retire after 25 years of service.

It is proposed that the employee will now retire after 25 years or 55 years of service.

At present, a deceased civil servant has a pension for children up to 24 years.

Now the age of children has been reduced from 24 to 21 years. New pension scheme approved.

Sindh cabinet approves pension reforms scheme to save Rs894 bn

Amendment of pension law will provide pension to employees on time, Sindh Chief Minister said and added that this amendment will solve pension problems.

The chief minister being in-charge minister of the finance department told the cabinet that in 2012 the number of government employees were 477,570 and their monthly salary and pension bill was Rs11.78 billion and RS6.523 billion respectively. He added that in 2020 the number of employees increased to 493,182 and the monthly salary bill increased to RS23.97 billion while the pension bill rose to RS13.329 billion.

“If the same post-retirement liabilities, including pension, commuted value of pension, gratuity, family pension and others are continued unabated the pension bill will exceed the salary bill within next 10 years,” he said and added therefore a study has been conducted so that necessary reforms could be introduced to control the ballooning pension bill.

Murad Ali Shah said that a restriction on early retirement (minimum 25 years of service and 55 years of age) with reduced pension, according to the number of years in service, was being proposed.

The financial impact is determined based on the assumption that the early retirement reduction factor would be 2.5 percent for each year remaining to reach 60 years of age, he said and added that the accrued pension liability would be declared by Rs433.326 billion.

The CM talking about another reform proposal said that it would be the use of average pay of the last three years of service as the basis to calculate the amount of pension instead of the last drawn salary.

“Setting pensionable salary to average salary of last three years has a reasonable financial impact on the accrued pension liability of active employees,” he said and further elaborated that the accrued pension liability would decrease by Rs348.827 billion.

Talking about `Family pension’ the chief minister proposed to limit it to immediate family members. “The family pension may be limited to wife or wives/husband/son (below 21 years)/daughter till marriage,” he said and added reduction in both the present value (PV) Defined Benefit Obligation (DBO) and the future rate of contribution required to finance future accrual of pension benefits on approximate basis.

He said the accrued pension liability would decrease by Rs112.179 billion. The cabinet approved the Pension Reform proposal and appreciated the efforts of the chief minister to introduce reforms.

Pension Reforms

In June last year, Sindh cabinet has approved a Pension Reforms Scheme under which around Rs894.4 billion would be saved, otherwise the pension bill of the government would surpass the salary bill within next 10 years.

The chief minister being in-charge minister of the finance department told the cabinet that in 2012 the number of government employees were 477,570 and their monthly salary and pension bill was Rs11.78 billion and RS6.523 billion respectively. He added that in 2020 the number of employees increased to 493,182 and the monthly salary bill increased to RS23.97 billion while the pension bill rose to RS13.329 billion.

“If the same post-retirement liabilities, including pension, commuted value of pension, gratuity, family pension and others are continued unabated the pension bill will exceed the salary bill within next 10 years,” he said and added therefore a study has been conducted so that necessary reforms could be introduced to control the ballooning pension bill.

Murad Ali Shah said that a restriction on early retirement (minimum 25 years of service and 55 years of age) with reduced pension, according to the number of years in service, was being proposed.

The financial impact is determined based on the assumption that the early retirement reduction factor would be 2.5 percent for each year remaining to reach 60 years of age, he said and added that the accrued pension liability would be declared by Rs433.326 billion.

The CM talking about another reform proposal said that it would be the use of average pay of the last three years of service as the basis to calculate the amount of pension instead of the last drawn salary.

“Setting pensionable salary to average salary of last three years has a reasonable financial impact on the accrued pension liability of active employees,” he said and further elaborated that the accrued pension liability would decrease by Rs348.827 billion.

Talking about `Family pension’ the chief minister proposed to limit it to immediate family members. “The family pension may be limited to wife or wives/husband/son (below 21 years)/daughter till marriage,” he said and added reduction in both the present value (PV) Defined Benefit Obligation (DBO) and the future rate of contribution required to finance future accrual of pension benefits on approximate basis.

He said the accrued pension liability would decrease by Rs112.179 billion. The cabinet approved the Pension Reform proposal and appreciated the efforts of the chief minister to introduce reforms.