Thread by @Jhagra

1. A thread on pension reforms; why it is one of the biggest issues facing govt. & why we had to act now to reform pensions.
Pension costs have increased more than any other budget line across Pakistan; 95 times in KP from 2003-4 till today - from 0.87 bln to 83 bln / year.

2. With no action, pension and salary payments would surpass provincial receipts in just 6 years. This was not a problem for tomorrow. This is today's problem.
No action puts the pension payments of existing and future pensioners at risk.

3. Just pension payments alone could rise to Rs. 460 bln by 2030 if no action were taken, given govt's increasing employee base, with average growth of 22% per year over the last five years.

4. There were 13 layers of pensioners receiving family pension pre-reform.

1. Pensioner
2. Widow
3. Son or Unmarried daughter
4. Widowed daughter
5. Wife of deceased son
6. Son of deceased son
7. Unmarried daughter of deceased son
8. Widowed daughter of deceased son

Cont...

5. 13 levels of pensioners (cont.)

9. Father
10. Mother
11. Brother
12. Unmarried sister
13. Widowed sister

14. Pension ceased, unless any of the previous set of relatives status changed, in which case the pension could be revived.

6. In addition, the current pension system allowed 1935 individuals to draw two pensions, and 738 active employees to take a salary plus a family pension.

7. 5000+ employees took early retirement at age 45, mostly teachers, drawing a full pension plus working in the private sector as teachers.

8. The pension fund mechanism in place was completely unworkable. In current form, the pension fund (Rs. 56 bln, ave growth 10%) would never fully fund pensions (Rs 83 bln, ave growth 22%); the fund itself was further depleting govt resources rather than resolving pension issues.

9. To utilise the pension fund as an endowment to fully fund pensions, the fund size today would need to be over Rs. 1,000,000,000,000 (one trillion).
The elephant in the room was that Pakistan is one of the only countries worldwide with a completely unfunded pension programme.

10. KP is the first govt to now put in place a detailed blueprint of reforms (details to follow) that will secure and make safe the pensions of current and future employees.

11. First, we have changed pension rules to reduce tiers in the pension hierarchy to dependent children, in line with international standards, and parents, and used the savings to increase the pension payment prospectively to widows from 75% to 100% as announced in the budget.

12. Second, we have increased the minimum early retirement age from 45 to 55, which saves over Rs. 12 billion in the first year, and over Rs. 150 billion in ten years.

13. We have also disallowed the withdrawal of dual pensions, or pensions being drawn by active employees. This is abuse of public funds.

14. The cabinet has approved the introduction of a defined contribution pension system; and the establishment department will move an amendment to the civil servants act to make all new employees liable to participate in the new contributory pension programme.

15. The contributory pension programme, which we will try to enact within 2021-22, will be compulsory for new employees, and optional for existing employees. It will give pension cover to over 100,000 public servants (in companies, authorities, MTI hospitals) without cover today.

16. To lighten the annual pension burden on public taxpayer money, the cabinet also approved a policy to utilise the profits earned on the pension fund to partially pay annual pension liabilities, i.e. to use the existing pension fund for it's intended purpose.

17. Finally, incredibly indebted to the gesture of PAS & PMS officers of the province, who graciously agreed that 20% of their pay raise would be contributed towards annual pension payments, creating the first pay-as-you-go pension mechanism for existing employees in Pakistan.