Pension instruments in Pakistan have been a topic of discussion for over a decade, with questions being asked over coverage selection related to investment and structural inadequacies in pension control.
The 2009 decision to include Boomerang retirees in the pension increase has had a compounding effect on the financial burden facing the federal government, meaning that each unused pension increase is applied to a growing group of beneficiaries.
As the magnitude of the blame becomes understood, the politicization of pensions, for both civilians and the armed forces, poses a significant obstacle to any debate on the issue and/or implementation of significant changes.
At present, the pension bill has grown to unsustainable levels, taking up a large portion of the federal government’s income and tax source of revenue. Over the past five years, the federal pension bill has seen a four-fold increase, reaching Rs 1.01 trillion within fiscal year 2025, indicating a 26% increase from the previous hour; At this rate, there could be a projected annual growth rate of 22-25 percent over the next 35 years.
In its flow-through approach, the pension system guarantees predetermined benefits upon retirement, without requiring employees to make contributions during their provider years, which places the entire burden of the pension system on the government.
Given an average expectancy of 67 years and an escape period of 60 years, a trust benefit of 30 years with transfer of benefits to community participants after the pensioner’s death creates additional burdens.
The most important lessons from global studies trade in environmentally friendly answers that can help build a decent pension system that is both economically sustainable and socially equitable. For example, in Sweden, a full multi-pillar type has been designed to provide financial security in savings through a mix of national and individual contributions.
The primary pillar, known as the source of revenue pension, operates on a pay-as-you-go (PAYG) basis, with 18.5% of an individual’s profits contributed to their pension.
Benefits from this pillar are calculated taking into account the individual’s lifetime profits, with a notional account value adjusted to take into account economic expansion, ensuring that the pension The balance relates to the flow of financial position.
The second pillar, the top tier pension, is a mandatory defined contribution scheme. Here, 2.5% of an individual’s profits are directed into a non-public budget, which the individual chooses with optimized investment methods in mind. This pillar empowers people to have a say about their possible financing options, potentially leading to increased returns according to the efficiency of the budget selected.
The third pillar is composed of voluntary non-public pension savings, which includes the motivation of tax benefits. This encourages individuals to supplement their required pension contributions with private savings, thereby securing their financial stability after retirement.
The Netherlands additionally boasts a strong multi-pillar pension system designed to provide financial security in migration. The program operates through a simple pay-as-you-go pension plan funded through payroll taxes, which ensures that benefits are paid at the same rate for all citizens from age 67 onwards.
Complementing this is the essential occupational pension, into which the maximum number of employees contribute; It works on the jointly mentioned contribution type, where contributions are jointly collected and invested, and profits are adjusted to suit the efficiency of the treasury.
Furthermore, the Dutch instrument encourages voluntary non-public pensions by providing tax incentives for private financial savings. One of the most prominent strengths of the program is its deep security and availability of beneficial benefits.
Finally, Singapore’s Central Provident Fund (CPF) operates on a mandatory defined contribution scheme. It is composed of 3 major accounts: the General Account (OA), which is used for housing, insurance and financing functions; Special Account (SA), mainly dedicated to saving financial savings; and Medisave Account (MA), earmarked for health care expenses.
Every worker and employer contributes to the accounts according to which the budget is allocated. Those contributions are invested in a variety of instruments, giving participants the freedom to choose their most preferred investment avenues.
The CPF system is lauded for promoting widespread nationwide financial savings and ensuring provision for housing, health care and migration needs. It underlines the importance of individual accountability and monetary skills, thus enabling voters to efficiently lead their personal budget and successfully plan their escape.
These are perhaps the most interventions that Pakistan can resist as it seeks to get ahead of its rising pension bill. As the issues escalate, the steady increase in the pension bill is economically unsustainable and takes up a dozen of the country’s total sources of revenue.
Environment should look at examples from around the world and find a solution that matches Pakistan’s problems, it will have to seek support from all stakeholders including the federal government, private sector and civil people.
It should focus on a gentle and phased strategy to allow significant changes and respect and fulfill the rights and expectations of retirees across the stream and generation.
Active and clear control of accruals, combined with a well-designed regulatory framework, is very powerful for any pension device situation. Those stakes, combined with savvy funding methods that provide protection and promote asset expansion, can form the backbone of a reformed and flexible pension system for Pakistan.
Scribbler Karandaz is an analyst in Pakistan.
Disclaimer: The views expressed on this piece are the personal of the author and do not necessarily reflect the editorial coverage of Geo.Television.
First published in The Information
