New pension guidelines from the government—find out what’s new

To deal with the quickly rising pension costs, which reached Rs10.55 trillion in 2024–25, the federal government has started a new contributory pension fund program.

The Ministry of Finance said that the goal of the change is to make the pension system last longer while also easing the load on the national budget.

The Ministry of Finance said that starting on July 1, 2024, the new contributory pension system will replace the old pension model for new federal employees.

The new method will put 22% of an employee’s pay into the pension fund. The person will put in 10%, and the government will put in 12%. A new non-banking financing firm (NBFC) will run the fund, and the financing Ministry will keep an eye on it.

This plan only applies to new hires.

The Finance Ministry made it clear that this new approach will not affect current government workers. Instead, it will only apply to people who are employed after July 1, 2024.

The armed forces are planned to start using it on July 1, 2025. The government has set aside Rs10 billion to create the new pension fund.

Rules for withdrawal and restrictions

Employees won’t be able to take money out of their pension accounts until they retire. But when they retire, they can take out up to 25% of the total amount, and the rest will keep earning benefits after they retire.

This framework is similar to international contributory systems, which let retirees save money and feel safe with their money.

The Ministry says that the plan was made with help from international financial institutions including the World Bank as part of bigger efforts to restructure the country’s finances.

Officials said that pension costs are now one of the biggest parts of current spending. For example, the military services’ pension costs are expected to exceed Rs742 billion in 2025–26.