ISLAMABAD(National Times)- The government has executed agreements with 16 pension fund managers to formally operationalise the Defined Contribution Pension Fund Scheme (DCPFS) launched a year ago for public sector employees as part of major pension reforms aimed at containing the snowballing pension burden on the budget.<\/p>\n\n\n\n
In an announcement, the Ministry of Finance said it had executed agreements with 16 eligible pension fund managers, most of them banks and insurance companies. Around 10 of these eligible fund managers are owned or led by major commercial banks in the country.<\/p>\n\n\n\n
They include ABL Asset Management Company, Al Habib Asset Management, Al Meezan Investment, Faysal Asset Management, JS Investments, MCB Investment, Alfalah Asset Management, HBL Asset Management, UBL Fund Managers and NBP Fund Management,<\/p>\n\n\n\n
The pension fund managers led by or owned by insurance companies include EFU Life Assurance and Pak-Qatar Family Takaful. The remaining funds \u2014 Atlas Asset Man\u00adagement, Lucky Invest\u00adments, National Investments and AWT Investments are owned by various business groups.<\/p>\n\n\n\n
Under the agreements and rules, these fund managers would set up, operate and manage conventional or Shariah-compliant funds for state employees under the federal government-defined contributory pension fund scheme in accordance with the Voluntary Pension System Rules 2005.<\/p>\n\n\n\n
Only these eligible pension fund managers shall be authorised to launch and manage employer pension funds for which the government will ensure annual budgetary allocation for the employer\u2019s contribution. The agreements entail standard terms and conditions for providing systems support and electronic transfer of contributions to the pension fund\u2019s designated bank accounts and further allocation of units to the relevant sub-funds in each employee\u2019s pension account as per the allocation policy.<\/p>\n\n\n\n
The agreements also envisage a mandatory insurance plan, providing death and disability risk cover to the employees, to be arranged by these fund managers.<\/p>\n\n\n\n
The eligible pension fund managers will establish separate pension funds, while the government is responsible for the creation of a Non-Banking Finance Company (NBFC) to assist in implementation and monitoring of the pension fund scheme. Till such time the NBFC is established and fully operationalised, the government itself, through the finance ministry, will perform the NBFC role and establish an online portal to facilitate opening of pension accounts of employees, obtain information and data from eligible pension fund managers or otherwise communicate with the fund managers.<\/p>\n\n\n\n
Under the rules, employees will not withdraw any amount from the pension account before retirement is notified. Even upon reaching retirement age, the employee shall not withdraw more than 25pc of the accumulated balance in the pension account, and shall invest the remaining amount in the manner prescribed in the Voluntary Pension System Rules, 2005, for a period of at least twenty years or till his death, whichever is earlier. However, the rules allow employees to transfer pension account balance from one eligible pension fund manager to another.<\/p>\n\n\n\n
The government had announced pension reforms in 2024 to introduce a contributory pension fund for all government employees, including civil government and armed forces personnel. In a formal announcement in the National Assembly, the government said the contributory pension scheme would apply to all civil employees of the federal government, including civilian employees paid from defence estimates appointed on a regular basis on or after July 1, 2024. A September 2024 notification stated that the scheme would also apply to armed forces personnel appointed on or after July 1, 2025.<\/p>\n\n\n\n
While the civilian side of the scheme has been implemented and the government has already set aside about Rs25bn for the scheme as its initial share, the contributory pension scheme for armed forces was deferred for a year to 2026 due to concerns over their peculiar nature of duties requiring detailed review, according to earlier statements by the finance minister and secretary.<\/p>\n\n\n\n
Officials said the contributory pension scheme for armed forces personnel, which had been postponed two years ago, had been further delayed owing to internal departmental consultations and challenging security conditions, hindering any move that could be seen demoralising personnel.<\/p>\n\n\n\n
The finance ministry notified in October 2025 that federal employees would contribute 10pc of their pensionable pay to qualify for a 12pc contribution from the public exchequer under the newly formalised contributory pension fund scheme. The total contribution rate will thus be 22pc, replacing the traditional pension system for new entrants. The October notification and pension rules superseded an earlier order of August 2024, which had set the government\u2019s contribution at 20pc.<\/p>\n\n\n\n
On Aug 20, 2024, the ministry initially announced the introduction of the contributory pension scheme for new entrants to the civil government and armed forces. At that time, employees were to contribute 10pc of their basic pay, while the government was to contribute 20pc.<\/p>\n\n\n\n
The contributory pension scheme was introduced on the advice of international lenders, notably the World Bank, to contain the rising pension liabilities, which the government had itself described as a growing fiscal risk. It does not apply to existing employees but aims to slow future growth in pension liabilities. Federal pension expenditure is estimated at Rs1.170tr for FY2026-27, including about Rs860bn for military pensions and about Rs300bn for civil employees. The pension budget had increased from Rs1.055tr in 2025-26.<\/p>\n","protected":false},"excerpt":{"rendered":"
ISLAMABAD(National Times)- The government has executed agreements with 16 pension fund managers to formally operationalise the Defined Contribution Pension Fund Scheme (DCPFS) launched a year ago for public sector employees as part of major pension reforms aimed at containing the snowballing pension burden on the budget. In an announcement, the Ministry of Finance said it […]<\/p>\n","protected":false},"author":2,"featured_media":130664,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-130663","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest_news","entry"],"yoast_head":"\n