Major Pension Reforms Introduced in Budget 2025–26

Islamabad, June 11, 2025: The federal government has announced key pension reforms under the Budget 2025-26 to reduce pressure on the national budget. Finance Minister Muhammad Aurangzeb, while presenting the budget, said over the years several reforms had been introduced to the pension framework through administrative directives, which gradually increased the state’s financial responsibilities.

To correct this, the government has now introduced structured reforms. One key change is that future pension increases will be tied to the Consumer Price Index (CPI), helping to bring more fairness and clarity to the process. He also mentioned that early retirement will now be discouraged to lower future pension payments.

Another major step is a limit on family pensions. After the death of a pensioner’s spouse, the family will now receive the pension for a maximum of 10 years. Earlier, these payments could continue for a lifetime, adding to rising costs. This step is meant to control long-term pension obligations.

Also, individuals will no longer be allowed to draw more than one pension at a time. If a retired person is rehired in a government role, they will have to pick either a salary or a pension—receiving both will no longer be permitted. This rule aims to prevent double benefits from public funds.

These reforms reflect a major shift in how pensions will be handled across the country. While some people may find these decisions difficult, the government considers them necessary to ensure long-term financial stability. Given the growing economic challenges, these measures are expected to help manage state spending more effectively.