The Pakistani government has taken a significant step in fiscal reform by signing agreements with 16 pension fund managers. These partnerships mark the operational phase of the Defined Contribution Pension Fund Scheme. This initiative aims to address the rising pension burden on the national budget which has become a major fiscal challenge.
Most of the selected managers are prominent banks and insurance firms including HBL, UBL, MCB, and various asset management companies. These entities will oversee the new contributory funds for civil employees. This shift marks a move away from the traditional pension system for new entrants, replacing it with a structure where both employees and the government contribute to individual retirement accounts.
Under the new rules, employees must contribute 10 percent of their pay while the government provides a 12 percent share. This change currently applies to new civil government employees. The government is also working to establish a Non-Banking Finance Company to monitor the scheme, though the finance ministry is currently managing oversight duties directly.
Withdrawal options are strictly limited to ensure long-term stability. Employees cannot access their funds before retirement and even then, they are restricted to withdrawing 25 percent of the balance, with the remainder requiring investment according to the Voluntary Pension System Rules of 2005. This reform serves as part of a larger plan to stabilize fiscal liabilities that have grown consistently over recent years.