Pension reforms for retiring employees introduced
Business
The new policy will help reduce financial burden on national exchequer
(Web Desk) - The federal government has introduced significant reforms to the pension system for public servants, aiming to reduce financial burden on the national exchequer.
The changes, implemented through an Office Memorandum (OM) issued by the finance division on January 1, 2025, are based on the recommendations of the Pay and Pension Commission 2022.
These reforms include significant modifications to pension calculation, restrictions on double pensions, and a revised methodology for annual increases.
According to the OM, pensions will now be calculated based on the average of pensionable emoluments drawn during the last 24 months of service prior to retirement.
This replaces the previous calculation methods, which were less standardised and prone to discrepancies.
Furthermore, senior officials entitled to multiple pensions must now choose one pension to draw.
The memorandum specifies: “Federal government employees who are currently in service and become entitled to a pension will not be eligible to draw that pension while still employed.”
However, in-service employees or pensioners whose spouses are also entitled to a pension may receive their spouse’s pension in addition to their own.
The new policy introduces a “baseline pension” concept, defined as the net pension calculated at the time of retirement, excluding the commuted portion.
