ISLAMABAD: Finance Min­ister Muhammad Aur­a­ngzeb said on Tuesday that pension payments have exceeded Rs1 trillion in the federal budget, surpassing the government’s entire development outlay.

Speaking at a seminar titled ‘Tr­a­nsition to Def­ined Contribu­t­ion Pension System’, organised by the Securities and Exchange Com­mission of Pakistan (SECP), Mr Aur­a­ngzeb said urgent reforms were needed to address ballooning pension costs.

“We had to stop the ble­e­ding,” he said, explai­ning the government’s dec­i­sion to transition all new civil servants to a Defined Contribution Pension Scheme from July 1, 2024.

He emphasised that this shift was a critical step taken even before addressing the legacy issue of unfunded pension liabilities. “This raises a fundamental question of macroeconomic sustainability,” he added, stressing the urgency of reform.

As part of pension reforms, the minister said the Defined Contribution Pension Scheme is a win-win for both the government and the employees. He said the government has increased the pension of retired employees by seven per cent in line with inflationary trends.

He said that the government has also proposed a 5pc tax on pensions above Rs10 million while protecting low and middle-income pensioners.

Highlighting the government’s reform agenda as laid out in the recently announced federal budget, Mr Aurangzeb reaffirmed the government’s commitment to macroeconomic reforms.

He emphasised that the government would continue to push forward on key areas such as privatisation, tax reform, state-owned enterprise (SOE) restructuring, federal government rightsizing, pension and public finance reform.

He also commended provincial governments for their proactive role, particularly in the area of public-private partnerships and for taking the lead on defined contribution initiatives.

He noted that the theme of the workshop — transitioning to def­ined contribution schemes — was both timely and significant, likening it to ongoing tariff reforms in its structural importance.

Mr Aurangzeb expr­es­sed confidence in the collective ability of stakeho­­lders to bring about me­­aningful change in Pak­istan’s pension landscape, driven by sustainability, transparency and long-term fiscal res­ponsibility.

Published in Dawn, June 18th, 2025