SUCCESSIVE governments have failed to address the financial plight of retired employees of the country’s private sector. In contrast to public-sector retirees, who enjoy tax-free pensions that are paid from the exchequer, private-sector employees receive, if at all, a consolidated amount on their retirement consisting of gratuity and provident fund. A post-retirement pension is a rarity in such cases.

The amount received as final settlement is generally invested in National Savings, long-term bank deposits and mutual funds offering monthly returns that enable the retirees to have at least some semblance of respectability in their post-retirement life. In every budget, the tax rates on these incomes go up. In the latest budget, the rate of tax on dividends from mutual funds has been increased to 25 per cent. The cumulative impact in most cases is a tax that is worth around two months’ annuity. This is cruel, if not criminal.

In the wake of skyrocketing inflation, decreasing rates of returns, and increased taxation, the purchasing power of private-sector retirees has been rather severely impacted as their earnings have been badly hit. The federal government should announce some relief, like taxation rates based on the status and age of the taxpayer.

Saleem Adil
Karachi

Published in Dawn, July 8th, 2025