Scaling back benefits: PM to consider axing multiple pensions

Proposal to be presented before premier today along with other austerity measures.

ISLAMABAD: Prime Minister Nawaz Sharif is set to consider a proposal today (Thursday) which seeks to discontinue the practice of giving more than one pension to privileged pensioners of the country.

The proposal to scale back post-retirement benefits will be part of the revenue and austerity measures shortlisted by Finance Minister Ishaq Dar for the financial year 2014-15, finance ministry sources said. Dar is expected to give a detailed briefing to the premier.

According to the proposal, pensioners who draw more than one pension will only be allowed to avail the highest one.

While the number of people who avail more than one pension is not very high, any move to withdraw additional benefits is likely to be positively received by the masses. At present, people who have served on more than one official position are entitled to take as many pensions.

For instance, Gen (retd) Pervez Musharraf is drawing pensions for being both a former president and army chief. Similarly, many former judges are withdrawing multiple pensions for their stints in the high courts and the Supreme Court.

According to sources, the government is also considering to only allow people who have served for a minimum of 15 years to draw a full pension. Below this threshold, pensions may be linked with period of service, they said.

Another proposal being considered is to tax anyone who receives an annual pension worth more than Rs400,000.

The government has already ruled out the possibility of withdrawing tax exemptions available to top office-holders of the country on allowances they receives as part of their salaries. The income of a common salaried person is taxed on the basis of the gross value of the income.

Sources said the government may not offer any solace to the masses due to tight fiscal position and a proposed tax target of Rs2.810 trillion, which has been dubbed ‘over-ambitious’ even before approval by Parliament.

In a separate meeting of the National Economic Council (NEC) today (Thursday), Prime Minister Nawaz will also approve next year’s national development plan of Rs1.175 trillion. The NEC will also approve next fiscal year’s annual plan that envisages 5.1% economic growth rate and an inflation target of 8%. The council will also approve the 11th Five-Year Development Plan of the country and the Vision 2025.

An important feature of the NEC’s meeting will be the Planning Commission’s (PC) critical assessment of the economic performance for the outgoing fiscal year and the prospects of the next fiscal, said sources.

They said the PC would tell the premier about the real economic performance, particularly on FBR’s original tax target of Rs2.475 trillion. The FBR is going to miss the target and has so far achieved 16% growth in revenues against the required 28% growth.

In its working paper for NEC, PC questioned the reality of 16% growth. “After adjusting for nominal GDP growth of 11.5% and tax measures including increasing GST from 16% to 17%, withdrawal of some tax exemptions, enhancing excise duty rates, the figures reflect a marginally positive real growth in tax revenues”, it added.

The working paper also highlights soaring current expenditures and risks to economic growth in the next fiscal year.