The federal government is considering reducing the retirement age for government employees from 60 to 55 to save Rs. 1 trillion per year in pension bills.
The government thinks this will help reduce long-term pension liabilities by approximately Rs. 50 billion annually, reported Dawn.
While the plan could cut pension payouts by shortening the payment duration, it may also increase higher upfront costs due to severance packages and early retirements.
The federal government’s pension costs have surged more than fivefold over the past decade, from Rs. 164 billion in 2011 to Rs. 988 billion in 2021. Comparatively, tax revenues have increased only 2.7 times.
The reforms also include the introduction of a contributory pension scheme for future employees. Public sector corporations and regulatory bodies may be asked to implement similar reductions in retirement age and fund severance costs independently.
Although the move aligns with practices in neighboring countries like India, Malaysia, and Sri Lanka, where retirement ages range from 55 to 60, concerns remain about the loss of experienced personnel and potential impacts on workforce efficiency.
If approved, the government believes this will help mitigate immediate pension costs in the long run.