Introduction to the 2025 Pension Scheme
In Islamabad this October 2025, the federal government of Pakistan announced a new contributory pension scheme for employees of the federal government and the armed forces. This scheme aims to tackle the rising burden on the national budget while ensuring long-term financial security for every employee. According to the Ministry of Finance, the government has set aside Rs 10 billion in a dedicated fund that will operate under modern management systems in collaboration with international institutions like the World Bank. This co-investment plan means both the government and employees contribute a portion of their salaries, creating a secure retirement structure.
Under this introduced scheme, the government contributes 12% while employees contribute 10% of their salaries towards the pension fund. At retirement, employees can withdraw 25% of their pension as a lump sum, while the remaining amount is disbursed monthly to provide a steady income. This plan ensures that employees enjoy long-term financial security, with a transparent, modern system that helps them plan their future. From my experience analyzing government initiatives, this pension scheme is one of the most structured and reliable programs introduced in recent years.
Why the New Pension Scheme Matters
The Pakistan government realized that the old pension system was unsustainable. Rising costs were putting a huge strain on the national budget, with total obligations in 2024 reaching Rs 1.055 trillion. The armed forces pensions projected for 2025 alone were 742 billion. This highlighted the need for a shift from a defined-benefit system to a defined-contribution model, ensuring long-term financial security for future employees.
By introducing a contributory and transparent scheme, the government aims to ensure fund viability, align financial management with global best practices, and reduce fiscal risk while controlling growing liabilities.
Key Points of the New Pension Approach:
- Increased retirement security for future government employees.
- Shared responsibility between employer and employees, making it a sustainable co-investment plan.
- Modernization of the system through efficient, defined-contribution fund management.
- Accountability and transparency with clear information on benefits, reducing uncertainty.
- Control over rising expenditures and costs, ensuring fiscal sustainability.
- Long-term confidence for generations with a shared, reliable approach to pensions.
- Strategic reform and planning to handle alarming levels of pension obligations effectively.
This scheme not only tackles unsustainable pension liabilities, but also introduces a co-investment model where the government contributes 12% and employees contribute 10% of their salaries, with the option to withdraw 25% at retirement and receive the remaining amount disbursed monthly.
Contribution Structure and Eligibility
The Pakistan pension scheme is designed as a co-investment model with employees contributing 10% of their monthly salary and the government adding an extra 12%. The total 22% contribution goes directly into the fund, allowing employees to gradually build a sustainable retirement fund while reducing the government’s financial burden.
This scheme applies to new federal employees recruited after July 1, 2024, and military personnel recruited after July 1, 2025. Current employees remain under the old pension system and are not affected by these changes.
Withdrawal Rules and Pension Fund Management
Employees cannot withdraw pension funds before retirement, but at retirement, they may withdraw up to 25% as a lump sum, with the remaining amount disbursed monthly. This ensures financial security for retirees while preventing premature withdrawals.
To maintain transparency and efficiency, the government will establish a Non-Banking Financial Company (NBFC) to professionally manage pension funds, investments, and follow international best practices. Regular audits and accountability measures ensure clear information and trust in the system.
Key Highlights and Features
- Employee contribution: 10%
- Government contribution: 12%
- Withdrawal limit: 25% at retirement
- Applicable for new employees only
- NBFC professionally manages the funds
- Backed by World Bank recommendations
- Dedicated fund under modern financial systems
- Aligns with international best practices to ensure sustainability and reduce fiscal burden
- Withdrawals allowed after 20 years or at age 80
This pension scheme strengthens Pakistan’s pension system, eases fiscal pressures, and ensures future employees enjoy reliable retirement benefits.
Final Thoughts
The 2025 Pakistan pension scheme represents a major step forward in securing the financial future of government employees. From my analysis, the co-investment model — where the government contributes 12% and employees contribute 10% — not only provides long-term retirement security but also helps control rising costs and reduce fiscal risk. The ability to withdraw 25% at retirement while the remaining amount is disbursed monthly ensures a steady income stream, giving employees peace of mind.
With a modern, transparent system managed under international best practices, supported by a dedicated fund of Rs 10 billion, and professionally overseen by NBFCs, this scheme brings efficiency, accountability, and sustainability to Pakistan’s pension framework. By addressing unsustainable liabilities and aligning with global financial standards, the government has created a structure that is reliable, structured, and forward-looking. For future employees, this initiative not only guarantees security but also instills confidence in a system built to last for generations.
FAQs
Who is eligible for the 2025 Pakistan Pension Scheme?
All new federal employees recruited after July 1, 2024, and military personnel recruited after July 1, 2025 are eligible. Current employees remain under the old pension system and are not affected.
How much do employees and the government contribute?
The government contributes 12% of the employee’s salary, while employees contribute 10%. These contributions form the co-investment fund for retirement.
Can I withdraw my pension before retirement?
No, employees cannot withdraw pension funds before retirement. At retirement, they can withdraw up to 25% as a lump sum, and the remaining amount is disbursed monthly.
How is the pension fund managed?
A Non-Banking Financial Company (NBFC) professionally manages the fund, following international best practices, ensuring transparency, accountability, and regular audits.
What are the main benefits of this pension scheme?
The scheme provides long-term financial security, sustainable retirement planning, transparent management, shared responsibility, and alignment with global best practices, easing the fiscal burden while securing future employees.