The government has signed agreements with 16 pension fund managers to formally launch the Defined Contribution Pension Fund Scheme (DCPFS) for public sector employees, a year after the scheme was first introduced, as part of reforms to control the growing pension burden on the national budget.
The Ministry of Finance said the agreements cover 16 eligible fund managers, mostly linked to banks and insurance companies, including ABL Asset Management, Al Habib Asset Management, Al Meezan Investment, HBL Asset Management, UBL Fund Managers, NBP Fund Management, EFU Life Assurance and Pak-Qatar Family Takaful, among others.
Under the rules, these managers will run conventional and Shariah-compliant funds for state employees under the federal contributory pension scheme. The government will make annual budgetary allocations for its share of contributions, while the agreements also include mandatory insurance covering death and disability risk.
The government is required to set up a Non-Banking Finance Company (NBFC) to oversee the scheme. Until then, the finance ministry will manage the process through an online portal for employee pension accounts.
Employees cannot withdraw funds before retirement, and afterwards may withdraw a maximum of 25 percent of their balance, with the rest invested for at least twenty years or until death. Transfers between fund managers are permitted.
The reforms, announced in 2024, cover civil employees appointed on or after July 1, 2024, and armed forces personnel appointed on or after July 1, 2025. The civilian component is already in effect, with around Rs25 billion set aside as the initial government share. The armed forces component has been delayed to 2026 over service-related concerns and security conditions.
Since October 2025, employees contribute 10 percent of pensionable pay, matched by a 12 percent government share, for a combined 22 percent, up from the earlier 20 percent government contribution set in August 2024.
Introduced on the advice of international lenders, including the World Bank, the scheme applies only to new entrants. Federal pension expenditure for FY2026-27 is estimated at Rs1.170 trillion, up from Rs1.055 trillion the previous year.
