KP revamps pension system

The contributory pension system for new government employees is the most significant step taken by the Khyber Pakhtunkhwa government to reduce the burden to Rs 92 billion on provincial treasury annually by ending the existing pension system.

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The Khyber Pakhtunkhwa government introduced a new contributory pension system, the most imperative step that aimed to reduce the burden of Rs92 billion on provincial capital annually by eliminating the existing system of pensions for the government employees.

Pensions in KPK are considered to be the largest budget challenge and there seems a 9500% increase from 2005 till date. The pension bill has reached Rs92 billion which is estimated to increase to 22 percent per annum. If the provincial government bill will exceed Rs1 billion then it will be challenging to pay pensions to government employees.

The proposed amendment has been approved by the provincial cabinet to Section 19 of the Khyber Pakhtunkhwa Civil Servants Act 1973. The contributory pension system will apply to the new recruitments once the amendments are passed by the provincial assembly. Furthermore, the new pension system will not be part of the terms of services of existing employees unless they want to be part of the system.

In the contributory pension system, the employees and the government both will make contributions to the employee’s pension fund. At the end of the service, it is the employee’s choice to continue to invest or to withdraw its pension when the service ends.

Read more: Pakistan’s unsustainable public pension system

According to Section 2 of the amendment bill “A person to be appointed on regular basis to a service or post in the prescribed manner, on or after the commencement of KP Civil Servants Amendment Bill 202, shall for all intent and purposes, be civil servant, except for the purpose pension and gratuity, be entitled to receive such amount contributed by him towards contributory provident fund, along with the contributions, made by the government to his account in the said fund.”