PSEs accused of illegally spending funds
Members of the cabinet have called for initiating a forensic audit of public sector enterprises (PSEs) for alleged illegal spending of their pension funds as the annual pension bill has touched a hefty Rs470 billion.
Sources told The Express Tribune that the annual pension bill was increasing and jumped to Rs470 billion in fiscal year 2020-21 compared to Rs304 billion in 2016-17.
Out of the total pension expense of Rs470 billion, the share of civil servants is estimated at Rs111 billion and for armed forces it is calculated at Rs359 billion.
In a recent meeting of the cabinet, it was pointed out that most PSEs had illegally spent their pension funds and were now seeking government support to pay pensions to their employees. It was suggested that a forensic audit should be undertaken to unearth the irregularity.
In the meeting, the prime minister stressed that eminent international experts should be hired and included in a committee to professionally evaluate the best available options as the pension expenditure was fast becoming unsustainable.
He directed the adviser to prime minister on finance and revenue to come up with a concrete proposal with necessary timelines.
During the meeting, it was pointed out that the pension bill was becoming unsustainable with the passage of time in the wake of increase in the rate of pension and the number of pensioners.
It was noted that it also included various allowances and pension payments by autonomous bodies were additional contingent liabilities. There were also several issues in pension disbursement and family pension.
Pay and Pension Commission
The Pay and Pension Commission was constituted in April 2020 and was given six months for preparing its recommendations.
According to its terms of reference, an alternative pension system should be evaluated including the setting up of pension funds.
The Covid-19 pandemic and the resignation of commission chairman have delayed the process. The Finance Division has requested the World Bank for technical assistance after concept clearance.
A World Bank report had recommended the establishment of a pension fund. The Finance Division submitted a paper in that regard to the concept clearance committee of the Planning Commission.
The committee approved the concept paper and a request for funded and unfunded technical assistance was sent to the World Bank in July 2020.
The Finance Division will prepare PC-1 about the regulatory framework, benefit design, contribution rates, benefit liability age and investment in funds. It will analyse the funds market with a view to assessing the availability of investment opportunities and projected returns.
It will assess the institutional framework and structure of regulatory institutions and inclusion and exclusion of policies or decisions. It will also examine required rules and regulations for employees of various organisations.
Published in The Express Tribune, August 29th, 2020.
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