Govt of Pakistan Finance Division (Regulations Wing) issued a Notification on 01-01-2025 in connection with the Future increase Methodology in Pension Federal Govt Pensioners. The Finance Division has also introduced a baseline pension. The details are as follows:

Future Increase Methodology in Pension Federal Govt Pensioners 2025

According to the Notification, the undersigned is directed to refer to the subject noted above and to state that, on the recommendations of Pay and Pension Commission-2020, it has been decided that henceforth future increase methodology in pension shall be as under:

1. The net pension [Gross Pension less commuted portion of Pension] calculated at the time of retirement will be termed as baseline pension.
2. Any increase in pension shall be granted on baseline pension.
3. Each increase shall be maintained as a separate amount until the time, the Federal Government decides to review and authorize any additional pensioner benefits.
4. The baseline pension will be reviewed by the Pay and Pension Committee every 3 years.

Provided that the current pension of the existing pensioner on the date of issuance of this O.M. shall be considered as baseline pension.

Provided further that baseline pension is deemed to include restored commuted portion of pension as and when restored.

Existing instruction on the subject shall stand amended to the extent of above with immediate effect

Explanation of Baseline Pension and Increase in Pension Method

There are four points for an increase in pension in the future for the pensioners that the Finance Division mentioned in this notification. These are as follows:

Baseline Pension

The Finance Division has introduced a new term of pension which is Baseline Pension instead of net pension. Here we explain the baseline pension.

Pension is calculated as below:

Gross Pension = Average Basic Pay x Total Length of Service x 7/ 300

Amount for pension calculation = 35% 0r 25%

Amount for Commute calculation = 65% or 75%

The Federal Government has not yet clarified the distribution of 100% into 65% or 75% to 35% or 25%.

As per the above points, the baseline pension is as follows:

Baseline Pension = Gross Pension – Commuted Portion of Pension (35% or 25%)

Increase in Pension

            In the future if any increase in pension Government grants will be on the baseline pension. Previously, the Government always increased pension on a net pension which was the sum of 65% pension at the time of retirement plus various increases in pension during various years. So now the Government will increase the pension on the initial pension or baseline pension.

Increase in Baseline Pension

             The government will review every three years to increase the baseline pension. If the Pay and Pension Commission finds it necessary to increase the baseline pension, then the Government will increase the baseline pension.

Before the issuance of this Notification, the current pension that the pensioners are getting is now their baseline pension. That is good for the previous pensioners.

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