Overview !
Commonly, pensions in Pakistan are provisions which are provided to retired employees of the formal sector, mostly government workers. However, most of the elderly population working in the informal sector remains largely unprotected by these social security schemes. There have been calls for devising and implementing reform in the pension sector of the country in a way where there is efficient deployment of resources and the eligible, yet economically disadvantaged portion of the retired population, is also entitled to receive and be endowed with this social security right.
Pension reforms are changes to the rules and regulations of pension plans that aim to reduce costs or increase revenues. Some of the common methods of pension reforms are:
1.
Lowering the benefit levels or the multipliers that determine the benefit amount
Increasing the period used to calculate the final average salary of an employee.
2.
Increasing the required age and/or years of service to qualify for a normal retirement benefit.
3.
Raising the retirement age or the amount of wages subject to the payroll tax.
4.
Privatizing the pension plan and exposing it to investment risk.
Some of the potential benefits of pension reforms are:
1.
Improving the fiscal sustainability and intergenerational equity of pension systems by reducing public spending or increasing public revenues.
2.
Enhancing the adequacy and coverage of pension benefits by expanding access to formal sources of retirement income and reducing poverty among the elderly.
3.
Promoting economic growth and labor market efficiency by reducing labor market distortions, increasing labor force participation, encouraging saving and investment, and supporting financial market development.
However, pension reforms also entail challenges and trade-offs, such as:
1.
Balancing the competing objectives of fiscal sustainability, adequacy, coverage, growth, and efficiency.
2.
Designing appropriate institutional arrangements and governance structures to ensure effective implementation and administration of pension systems.
3.
Addressing the transition costs and political economy issues that may arise from shifting from one pension system to another.
4.
Protecting the rights and interests of current and future pensioners while ensuring fairness and transparency.
5.
Adapting to changing demographic, economic, and social conditions that may affect the performance and outcomes of pension systems
Therefore, it is critical to ensure pension reforms in Pakistan to develop public and private sectors by improving the fiscal situation, social protection, economic performance, and institutional capacity of the country. However, it is also important to consider the specific context, needs, and objectives of Pakistan and its population when designing and implementing pension reform.
Then, there is another perspective. Should pension reforms not also consider the abolishing of pensions altogether? There is criticism that Public servants hardly perform their duties & their productive contribution towards economy & work has been so low that most of the organizations are dysfunctional. Then, they also take pensions till they die & even, their dependents do carry on. Then, other old age people in Pakistan even don’t have a social protection system like that of pensions. Thus, socially, protection system of pensions is discriminatory. Furthermore, the state exchequer is unable to pay the pension money to millions of retired public servants.lastly, pensioners have no productive role after the age of retirement. Therefore, pension reforms must also consider the other side of the story.
Lastly, there is a need to implement contract system in public sector & it will eventually abolish the pension culture & also ensure a functional performance system. Merit based promotion & performance based retention are the way forward for public sector in Pakistan.
