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The federal government is considering reducing the retirement age to 55 from the current 60 years for government employees to manage the rising pension burden.

According to a report by Dawn, this proposal, suggested by an international lender, is part of broader pension reforms under review. Reducing the retirement age by five years could lower annual pension expenses by Rs50 billion if implemented universally.

The government is considering a phased rollout to manage the initial surge in severance costs. The move could also open opportunities for skilled public sector employees to transition to the private sector.

Pakistan’s current federal pension bill exceeds Rs1 trillion, with Rs260 billion allocated for civil servants and Rs750 billion for armed forces personnel. To mitigate the growing liability, the government recently introduced a contributory pension scheme for new hires.

Officials said public sector corporations, regulatory authorities, and professional councils might also be instructed to adopt similar retirement age reductions. Financial requirements for these reforms would be managed by the respective entities, without reliance on federal resources.

The finance ministry last year proposed increasing the superannuation age to 62 to temporarily delay retirement payouts, but the establishment division opposed the idea.

Currently, pensions are calculated based on the last drawn salary, capped for those completing 30 years of service.

At a meeting chaired by Finance Minister Muhammad Aurangzeb, the Economic Coordination Committee (ECC) raised concerns over delays in implementing earlier decisions on pension reforms. These reforms include amendments proposed in May and June, which remain stalled due to prolonged consultations with stakeholders.

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