Voluntary Pension Scheme introduced by Pakistani government

Voluntary Pension Scheme

Voluntary Pension Scheme introduced by Pakistani government

The Pakistani government has introduced a new “Voluntary Pension Scheme” to fulfill the condition of the IMF. The new scheme is because the International Monetary Fund (IMF) asked the federal government to change the current traditional pension system with the Voluntary Pension Scheme.

This scheme will start on July 1, 2024. All new government employees will be eligible to join this scheme from July 1. New government employees will obtain voluntary pensions instead of the traditional government scheme. This scheme will provide balanced income to employees instead of a Provident Fund or gratuity after retirement.

However, older workers will get their pensions from the official budget following the older pension scheme of the government. If the older workers agreed, the government could move them to a new pension plan.

The Securities and Exchange Commission of Pakistan (SECP) made the new pension plan. SECP explained both businesses and public sectors can use the new pension scheme. It stated that the private sector should only offer voluntary pension schemes to employees rather than providing Provident Funds or Gratuities.

SECP claimed that the Provident Fund or Gratuity does not provide regular income to employees upon retirement. Employees’ pension benefits will be maintained under this program regardless of changes in their employment status.

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There are recently 43 pension funds in the country with total investments of more than 61 billion rupees. Khyber Pakhtunkhwa was the first government to invest in pension funds two years ago and about 21 pension funds are already operational.

The Punjab Government is considering establishing a Voluntary Pension Scheme to replace the existing pension system. The purpose is to reduce the financial load on the provincial budget. Hence, the Punjab government has asked SECP for help in the implementation process.

The IMF directed the Pakistani government to implement this plan to reduce the existing pension burden on the government. According to the Ministry of Financial sources, the government would include provisions for a new pension plan in the finance bill in July. The details of this plan have yet to come as implying procedure is underway.

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