The federal government has introduced a new pension system called the “Federal Government Defined Contribution Pension Fund Scheme Rules 2024,” under which the traditional pension system for government employees will be replaced by a new contributory (participatory) system.
According to a notification issued by the Ministry of Finance, this measure was approved on August 27, 2025, and has now been sent to all federal ministries, divisions, and institutions for implementation.
Under the new pension system, federal government employees will now have to contribute a certain amount monthly toward their pension, with the government also contributing a share.
The notification states that the government (employer) will contribute 12% of the employee’s pensionable salary every month, while the employee will contribute 10% of their salary to the pension fund.
Both these contributions will be accumulated in a specific fund, which will be invested in various projects.
When the employee retires, the pension amount will be based on the profits generated from this fund.
According to sources, the system is currently being implemented only for civilian employees.
The process has not yet started for the Pakistan Armed Forces, so for now, the government and employee contribution rates for them remain at zero.
Officials from the Ministry of Finance say this reform is introduced to reduce the growing financial burden of pensions on the government, to make the pension system sustainable and financially stable, and to align Pakistan’s pension system with international standards.
In recent years, pension payments have increasingly strained the government’s budget.
With the new system, this expense will gradually decrease, and employees’ retirement funds will be based on their own accumulated contributions plus investment returns.
The Ministry of Finance has sent this notification to the Auditor General of Pakistan, Accountant General Pakistan Revenue (AGPR), State Bank of Pakistan, and all major ministries, including Defence, Education, Railways, Energy, IT, and Climate Change, for immediate implementation.
