The federal government has signed agreements with 16 pension fund managers to formally launch the Defined Contribution Pension Fund Scheme (DCPFS), a key reform aimed at reducing Pakistan’s growing public-sector pension liabilities.
The move is significant because it shifts newly recruited federal employees from the traditional government-funded pension model to a contributory system designed to improve the long-term sustainability of public finances.
The agreements mark another milestone in Pakistan’s pension reform programme as the government seeks to contain pension expenditures that are expected to exceed Rs1.17 trillion in the current fiscal year.
Key Details
- The government has authorized 16 pension fund managers to operate the Defined Contribution Pension Fund Scheme (DCPFS).
- Both conventional and Shariah-compliant pension funds will be available.
- A dedicated Non-Banking Finance Company (NBFC) will oversee the scheme.
- Employees will contribute 10% of pensionable salary, while the government will contribute 12%.
- Pension liabilities are projected to reach Rs1.17 trillion in FY2026-27.
Government Appoints 16 Pension Fund Managers
According to the Ministry of Finance, the approved institutions include leading banks, asset management companies, and insurance providers authorized to establish and manage pension funds for eligible federal government employees.
The approved fund managers are:
- ABL Asset Management
- Al Habib Asset Management
- Al Meezan Investment
- Faysal Asset Management
- JS Investments
- MCB Investment
- Bank Alfalah Asset Management
- HBL Asset Management
- UBL Fund Managers
- NBP Fund Management
- EFU Life Assurance
- Pak-Qatar Family Takaful
- Atlas Asset Management
- Lucky Investments
- National Investment Trust (NIT)
- AWT Investments
The selected fund managers will also arrange mandatory insurance coverage protecting employees against death and disability.
How the New Pension Scheme Works
Under the new pension framework, the government will establish a dedicated Non-Banking Finance Company (NBFC) to supervise implementation, monitor fund managers, and ensure regulatory compliance.
Until the NBFC becomes operational, the Ministry of Finance will perform these responsibilities and develop an online portal for pension account management.
The scheme also places restrictions on early withdrawals.
After retirement, employees will be permitted to withdraw up to 25% of their accumulated pension savings as a lump sum. The remaining balance must stay invested under the Voluntary Pension System Rules, 2005 for at least 20 years or until the retiree’s death, whichever comes first.
Background
Pakistan introduced the Defined Contribution Pension Fund Scheme in 2024 for all civilian federal government employees appointed on or after July 1, 2024, replacing the traditional unfunded pension system for new recruits.
The implementation for armed forces personnel, originally planned from July 1, 2025, has been postponed.
Under the revised contribution structure, employees contribute 10% of their pensionable salary, while the federal government contributes 12%. This replaced an earlier proposal under which the government would have contributed 20%.
What This Means
Pakistan’s pension bill has risen sharply over the past decade, creating increasing pressure on public finances.
According to the Ministry of Finance, pension liabilities are projected to reach Rs1.17 trillion in FY2026-27, including approximately Rs860 billion for military pensions and Rs300 billion for civilian pensions.
Officials believe the contributory pension system will gradually reduce the government’s long-term financial obligations while providing professionally managed retirement savings for public employees.
A Ministry of Finance official said the agreements represent a significant step toward implementing the government’s broader pension reform agenda.
What’s Next?
The Ministry of Finance will continue supervising the scheme until the dedicated NBFC becomes operational.
Authorities are also expected to launch the online pension management portal, allowing eligible employees to monitor contributions, investment performance, and retirement savings.
The government may also announce a revised implementation timeline for the armed forces component of the pension reforms.
Frequently Asked Questions (FAQs)
What is Pakistan’s Defined Contribution Pension Fund Scheme?
It is a contributory pension system for newly recruited federal government employees where both employees and the government contribute to individual retirement accounts.
Who can join the new pension scheme?
The scheme applies to civilian federal government employees appointed on or after July 1, 2024.
How much do employees and the government contribute?
Employees contribute 10% of their pensionable salary, while the federal government contributes 12%.
