 "Pakistan plans to reduce retirment age by 22. PTI")
After recovering from a devastating economic crisis, the Pakistani government is considering reducing the country’s average retirement age by five years to 55. While Prime Minister Shahbaz Sharif’s government is planning to take the step to contain long-term pension bills, the retirement age for selective positions might increase.
According to Pakistani news outlet Dawn, this was one of the proposals suggested by the International Monetary Fund after it approved the bailout package to save the cash-strapped country. Interestingly, the suggestion came a year after the country’s Finance Ministry proposed increasing the superannuation age by two years to 62 for temporary delays to payments on account of retirement benefits. However, the move was opposed by the IMF.
As per the report, the matter was discussed at a meeting last week, which was presided over by Finance Minister Muhammad Aurangzeb. During the meeting, the Economic Coordination Committee (ECC) of the cabinet expressed concerns over the delay in the implementation of instructions to reform the pension scheme, delivered by the international financial body on May 27 and June 13.
Long way to go
In the meeting, the parties agreed that it would take more time to implement reform in the pension scheme which is currently in place, Dawn reported. During the meeting, the ECC argued that pension payout could drop in case of reducing the age of retirement by five years. Hence, the move has the potential to reduce the government’s pension liability expense by an estimated PKR 50 billion per annum, if it gets implemented across the board.
However, the critics pointed towards the initial increase in expenditure that would arise because of early severance packages. Hence, they argued that the government should implement this in a phased manner. According to Dawn, the current federal pension bill goes beyond PKR 1 trillion, including a civil and armed forces share of about PKR 260 billion and about PKR 750 billion, respectively.
To prevent the increasing flow of annual pension bill, the country’s government has introduced a contributory pension scheme for all future government employments.