Karachi:
The Federal Government has introduced significant pension reforms as part of the 2025-26 budget, with the aim of rationalizing public spending and reducing the growing fiscal burden raised by the existing pension system.
By revealing the 2025-26 budget in the National Assembly on Tuesday, the Minister of Finance, Muhammad Aurengzeb, announced that the retired public servants who join at the service of the Government must now choose between their pension or the new salary, effectively ending the practice of dual financial benefits.
Among the new measures, the government has also imposed a 5% tax on high -income pensioners, defined as children under 70 years of age with an annual pension exceeding RS10 million. However, the minister clarified that low and medium -sized pensioners will remain exempt from this tax.
The duration of family pensions has been limited to 10 years after the death of the pensioner’s spouse, and multiple pensions will no longer be allowed.
Aurengzeb said that for decades, successive administrations had modified the pension system through executive orders, which resulted in a disproportionate burden for the National Treasury. The current reforms, he said, aim to optimize the pension structure and align future increases with the consumer price index (CPI) to guarantee sustainability.
In addition, he declared that premature retirement will be discouraged under the new policy framework, reinforcing the government’s commitment to a financially viable pension system.
