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Introduction of the Contributory Pension Fund Scheme
The federal government has launched a new Contributory Pension Fund Scheme aimed at all civil employees, including those paid from Defence Estimates, who are appointed on a regular basis starting from July 1, 2024. This significant policy shift is designed to enhance the financial security of federal employees in their retirement years.
Applicability to Armed Forces
In a recent office memorandum, the Finance Division clarified that this new scheme would also extend to members of the Armed Forces who are appointed on a regular basis starting from July 1, 2025. This expansion reflects the government’s commitment to providing equitable retirement benefits across various sectors of federal employment.
Contribution Rates for Employees and Government
Under this new pension scheme, both employees and the federal government will make contributions towards the fund. The contribution rates are set as follows:
- Employee Contribution: 10% of the Basic Pay
- Government Contribution: 20% of the Basic Pay of the employees
These contributions will be deducted from the basic pay, ensuring a steady accumulation of pension funds over the employee’s tenure.
Provisional Nature of Contribution Rates
The Finance Ministry has indicated that the current contribution rates are provisional and may be subject to change. This suggests that the government is open to adjusting the scheme to better meet the needs of employees and ensure its long-term sustainability.
Background and Approval by ECC
It is important to note that the Economic Coordination Committee (ECC) of the Cabinet provided principle approval for the establishment of this Pension Fund in June. The ECC’s decision was a crucial step in formalizing this scheme, underscoring the government’s proactive approach to reforming pension policies.
