Islamabad (October 2025): The Government of Pakistan has launched the New Pension Scheme 2025 for newly recruited government employees and armed forces personnel. This major reform aims to reduce the growing pension burden on the national budget and create a sustainable, contributory retirement system for future employees.
According to the Ministry of Finance, the government has allocated Rs. 10 billion to establish a modern pension fund, managed under international financial standards with the support of global institutions like the World Bank.
Why a New Pension Scheme Was Introduced
Pakistan’s pension liabilities have increased sharply over the past few years, putting immense pressure on the national treasury.
| Category | Pension Liabilities |
|---|---|
| Total pension obligations (2024) | Rs. 1.055 trillion |
| Armed forces pensions (2025 projection) | Rs. 742 billion |
The older system was non-contributory, meaning the government bore the entire cost. To make it sustainable, the new system follows a shared contributory model where both employees and the government contribute.
How the New Contributory Pension System Works
The New Pension Scheme 2025 introduces a two-part contribution system:
- Employee contribution: 10% of monthly salary
- Government contribution: 12% of monthly salary
- Total contribution: 22% of the employee’s salary goes into the pension fund
This structure allows employees to build a personal retirement fund over time while easing the government’s financial load.
Who Is Eligible for the New Pension Scheme?
The scheme applies to new recruits only:
- Federal employees hired after July 1, 2024
- Military personnel recruited after July 1, 2025
Note: Current government and military employees will continue under the old pension system and are not affected by these changes.
Rules for Withdrawals and Retirement Benefits
The new pension fund is designed to promote long-term savings and prevent early withdrawals. Here’s how it works:
- Employees cannot withdraw funds before retirement.
- Upon retirement, they can withdraw up to 25% of their total accumulated funds as a lump sum.
- The remaining 75% will be disbursed as monthly pension payments.
This ensures a stable income for retirees while maintaining the integrity of the fund.
Pension Fund Management – Transparency and Accountability
To ensure efficient management, the government will establish a Non-Banking Financial Company (NBFC) to oversee the pension fund.
The NBFC will:
- Professionally manage all pension investments
- Follow international best practices
- Ensure transparency, regular audits, and strict accountability
This structure will improve financial oversight and prevent misuse of funds.
Key Features of Pakistan’s New Pension Scheme 2025
| Feature | Details |
|---|---|
| Employee Contribution | 10% of monthly salary |
| Government Contribution | 12% of monthly salary |
| Total Monthly Contribution | 22% of salary |
| Withdrawal Option | 25% lump sum at retirement |
| Remaining Pension | Paid as monthly income |
| Fund Management | Managed by NBFC |
| Coverage | Only for new recruits |
| Oversight | Backed by World Bank guidelines |
Benefits of the New Pension Scheme
The Pakistan New Pension Scheme 2025 brings multiple long-term advantages:
For Employees
- Builds a secure retirement fund
- Offers transparency and professional fund management
- Provides both lump sum and monthly income options
- Ensures financial independence after retirement
For the Government
- Reduces future budgetary pressure from rising pension costs
- Introduces shared responsibility through employee contributions
- Promotes modern financial governance
- Aligns Pakistan’s pension policy with global best practices
Why This Reform Matters
The new pension model is not just a financial adjustment—it represents a shift toward self-sustainability and accountability in Pakistan’s public finance system.
By encouraging contributions from both the employee and the state, this system ensures:
- Greater fiscal discipline
- Reduced dependency on government spending
- A stable and transparent retirement mechanism
It also positions Pakistan closer to international pension models adopted in countries such as Malaysia, Turkey, and Indonesia.
Conclusion
The Pakistan New Pension Scheme 2025 marks a turning point in the country’s financial management and employee welfare system. By adopting a contributory model, the government ensures long-term pension stability while reducing the ever-growing fiscal burden.
This reform provides financial security, transparency, and sustainability—ensuring that every new government employee contributes to a stronger, more balanced future for Pakistan’s economy.
