Pakistan’s biggest liability: the unsustainable pension system

CHITRAL: Pakistan is at the verge of an economic collapse; no need to stress on that. The unrealistic expenditure burden on the exchequer is the main culprit for this impending capitulation, even if we put aside the corruption and other blah blah, for the moment.

One monster that is eating up the income of the exchequer is the unrealistic pension system that is in practice in Pakistan. A person after retirement keeps getting pension till his death and thereafter the pension is transferred to his/her family. It is like a snowball getting bigger and bigger with time and with population increase. According to a report, In the last ten years, while Pakistan’s tax revenues increased by 2.7 times, the pension bill from the federal government, which includes military pensions (36 percent of the total
annual pension liabilities), increased by 5.2 times.

The burden of pension liability on the government is increasing parabolically and any economic bankruptcy faced by the country would be a direct result of this monstrous burden, besides other smaller ones.

That the problem of pension liabilities is so severe, what could be a possible solution to it?
One way of halting the snowballing effect of pension liabilities on the government is to pay a lump some amount to a pensioner at the time of retirement.  The huge infrastructure for management of monthly pensions, their own expenses and the corruption that goes on there in would be eliminated. The system of lump some payment of pensions known as ‘golden handshake’ is being followed by private organizations, banks, NGOs etc. The pensioner can keep his lump some money in a bank, saving center, insurance company, etc and get monthly return on it along with the interest.

The question arises as to from where will the government get such a huge sum to dispose off all the pensioners in lump some. The answer is that the government can borrow the money from the IMF, the world bank etc (like it is already doing for flimsy reasons) to clear the liabilities of pensioners and from then there will be no draconic budget allocation for monthly pensions. .. CN report, 29 Dec 2022

3 thoughts on “Pakistan’s biggest liability: the unsustainable pension system

  1. Pension funds pay for itself, while in active service employees contribute or should contribute towards their pension fund , as the number of employees increase this fund also increases , the problem arises when pension funds are misused

  2. Payment of full pension at the time of retirement instead of monthly pension is good both for the pensioner as well as the government.

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