The Khyber Pakhtunkhwa government has introduced a new pension scheme after amending the Civil Servant Act 1973 to reform the pension system, which includes retirement money as lump sum instead of monthly payment.

A separate bank account will be established to manage these funds, ensuring that the payments do not burden the treasury at the time of disbursement.

This new pension system has been named the “Contributory Pension System,” where deductions will be made from the employees’ salaries based on their pay scale, and the provincial government will also contribute an equal share.

Under this new scheme, the monthly pension system has been abolished, and the formal notification has also been issued.

This new pension system applies to all employees hired after June 2022, but it has not yet been implemented for the civil bureaucracy.

KP Finance Department has stated that new employees will receive their pension as a lump-sum payment upon the completion of their service. The pension fund will involve monthly contributions from the employees’ basic salaries, matched by similar contributions from the government. The funds in the pension account will accrue interest, which will then be paid out to the employees, ensuring no burden on the treasury.

According to the Finance Department, the federal government is also considering adopting a similar pension system, which will establish a uniform pension system across the country.

The Finance Department sources say that while the monthly pension system is being abolished, the lump-sum payment upon retirement will be more significant. Furthermore, the new system will provide interest-free loan facilities to employees to help them start projects like building a house before retirement.

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The program has now been expanded to include new officers joining the provincial bureaucracy as well, making Khyber Pakhtunkhwa the first province to abolish the traditional pension system for government employees.