by In a significant move to address the escalating pension liabilities and ensure fiscal sustainability, the Punjab government has introduced a series of comprehensive reforms to the civil service pension system. These reforms, effective from December 2, 2024, aim to modernize the pension framework, enhance transparency, and align benefits with contemporary economic realities.
Key Highlights of the Pension Reforms
1. Applicability and Scope
The revised pension rules will apply exclusively to government servants who retire or pass away on or after December 2, 2024. Those who retired or died before this date will continue to receive pension benefits under the previous regulations, ensuring that existing pensioners are not adversely affected by the changes.
2. Redefinition of Family Pension Eligibility
Under the new rules, family pension eligibility is confined solely to the spouse of the deceased employee. The pension will be payable for a maximum duration of ten years or until the remarriage of the widow, whichever occurs earlier. This provision is not retrospective; spouses of government servants who died prior to December 2, 2024, will continue to receive family pensions under the earlier regulations without time limitations. Additionally, other dependents such as sons, unmarried daughters, widowed or divorced daughters, and unmarried sisters will no longer be eligible for family pension once the spouse becomes ineligible after the effective date.
3. Calculation of Pensionable Salary
The methodology for calculating pensionable salary has been revised. The average emoluments used to compute pension will now be based exclusively on basic pay, including personal pay, as drawn on July 1st of each of the last three financial years preceding retirement. Previously admissible allowances such as Notional Increment, Special Pay, Qualification Pay, Technical Pay, and Senior Post Allowance will no longer be included in the pension base. This change will affect those retiring between December 2, 2024, and July 1, 2025. The News International
4. Annual Pension Increases Tied to Adhoc Relief Allowance
Annual increases in pension will now be linked to 50 percent of the Adhoc Relief Allowance (ARA) granted during each financial year. If no ARA is sanctioned for a particular year, no pension increase will be granted. ARAs awarded in previous years—specifically 2011, 2015, 2022, 2023, and 2024—will not be retrospectively applied to individuals retiring under the new regime. The News International
5. Simplification of Age-Based Reduction Factor
To promote consistency, the government has simplified the application of the age-based reduction factor used in pension calculations. It will now be determined based on the last completed year of age, ignoring additional months or days. For instance, a civil servant aged 58 years and 11 months will be treated as 58 years old, with a four percent reduction factor applied. The News International
Introduction of Defined Contribution Pension Scheme
In addition to the aforementioned reforms, the Punjab government has introduced the Punjab Defined Contribution Pension Scheme Rules, 2025. This scheme mandates that both the government and the employee contribute to the pension account, with the government contributing 20% and the employee contributing 10% of the basic pay. The accumulated funds will be managed by qualified pension fund managers, ensuring stability and growth. Employees will have the option to choose between conventional or Sharia-compliant pension funds. Upon retirement, they will have the option to receive monthly pension payments or withdraw their savings, subject to specific conditions.
