The federal government has signed agreements with 16 pension fund managers to operationalize its Defined Contribution Pension Fund Scheme (DCPFS), marking a major step in implementing pension reforms to reduce the long-term fiscal burden of public-sector pensions.
According to the Ministry of Finance, the agreements authorize 16 eligible pension fund managers, including major banks, asset management companies and insurance firms, to establish and manage conventional and Shariah-compliant pension funds for eligible federal government employees.
The approved fund managers include 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), and AWT Investments.
Under the framework, the fund managers will also arrange mandatory insurance coverage for employees against death and disability. The government will establish a dedicated Non-Banking Finance Company (NBFC) to oversee implementation and monitoring of the scheme.
Until the NBFC becomes operational, the Ministry of Finance will perform those functions and develop an online portal to facilitate pension account management.
The scheme also restricts withdrawals before retirement. After retirement, employees will be allowed to withdraw up to 25 percent of the accumulated balance as a lump sum, while the remaining amount must remain invested under the Voluntary Pension System Rules, 2005, for at least 20 years or until the employee’s death, whichever occurs earlier.
Pakistan introduced the contributory pension scheme in 2024 for new federal government employees to gradually replace the traditional unfunded pension system. The reform applies to civilian employees appointed on or after July 1, 2024, while implementation for armed forces personnel, originally scheduled from July 1, 2025, has been delayed.
Under the current framework, employees contribute 10 percent of their pensionable pay, while the government contributes 12 percent, replacing the earlier proposal of a 20 percent government contribution.
The reforms were introduced to contain Pakistan’s rapidly rising pension liabilities, which are projected to reach Rs. 1.17 trillion in FY2026-27, including around Rs. 860 billion for military pensions and Rs300 billion for civilian pensions.
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