The Khyber Pakhtunkhwa (KP) government has introduced a revamped pension scheme by amending the Civil Servant Act of 1973, shifting from a monthly pension payout to a lump sum retirement payment.
This new system, known as the “Contributory Pension System,” involves deductions from employees’ salaries based on their pay scale, with the provincial government matching these contributions.
A dedicated bank account will be set up to manage these funds, ensuring the payments do not strain the treasury when disbursed. This scheme, which replaces the monthly pension system, has been officially notified and applies to all employees hired after June 2022, though it has yet to be implemented for the civil bureaucracy.
The KP Finance Department clarified that new employees will receive a lump-sum pension upon completing their service. The pension fund will be built from monthly contributions taken from employees’ basic salaries, with equal contributions from the government. These funds will earn interest, ensuring the system remains fiscally sustainable without burdening the treasury.
Additionally, the Finance Department mentioned that the federal government is considering adopting a similar pension system to create a uniform approach nationwide. According to sources, while the monthly pension system is being phased out, the lump-sum payments at retirement will be more substantial. The new scheme also includes provisions for interest-free loans to help employees undertake projects like building a house before retirement.
The program’s expansion now includes new officers joining the provincial bureaucracy, making KP the first province to eliminate the traditional pension system for government employees.
