Retirement age

K-P finance minister says an increase in retirement age of govt servants would save province Rs140b in around a decade

The K-P finance minister says an increase in the retirement age of government servants would save the province Rs140 billion in around a decade. Apparently it looks like a contradiction in terms. However, the issue stands to scrutiny if the increasing pension bill of the province is taken into account. The provincial government had decided to increase the retirement age of its employees from 60 years to 63 years, which reduced the pension bill to Rs5 billion from Rs6-7 billion a month resulting in a saving of Rs10 billion over six months. Later, the government’s decision was challenged in the Peshawar High Court. After the high court declared the decision null and void in February last year, the pension bill surged to Rs7.5 billion a month and it cost the government Rs13 billion in the past eight months. The provincial government took the matter to the Supreme Court, which struck down the high court judgment.

Now the province’s pension bill is Rs86 billion per annum nearly equal to its annual development budget outlay of Rs104 billion. So the pension bill accounts for 18% of the total budget outlay. Over the years, the pension bill has constantly been rising. Fifteen years ago the province’s pension liability stood at one billion rupees or only 1% of the total budget outlay. So there was a need to take measures that would enable the government to rationally manage its pension liabilities. For the past 25 years, successive governments deliberated over the issue of pay and pensions but practically nothing was done. Soon after coming into power the present K-P government introduced changes relating to pensions to the Civil Service Rules. Increasing the superannuation age of government servants might lead some to fear that this could add to a further rise in joblessness. The minister tried to set such apprehensions at rest saying that the savings made in the pension bill would be invested in employment-generation schemes. All said and done, it is necessary to ensure that pensions are not delayed.

Published in The Express Tribune, January 10^th, 2021.

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