PESHAWAR: Khyber Pakhtunkhwa finance minister Taimur Saleem Jhagra on Friday said an increase in the retirement age of government employees could save the province Rs140 billion in around 10 years.

“Though we [government] have to take other pension reforms, the single decision of higher retirement age will save the province around Rs140 billion in around a decade,” the minister told a news conference here.

On Thursday, the Supreme Court had set aside the Peshawar High Court’s Feb 2020 decision to turn down the KP government’s move to increase its employee’s upper age limit from 60 years to 63 years, and referred the matter back to the high court for fresh decision.

The provincial government had moved the Supreme Court against the high court’s verdict.

Mr Jhagra said that the rejection of the government’s retirement age decision by the high court had financial implications.

Minister insists initiative won’t reduce employment opportunities

He said the annual pension bill, which stood at Rs6-7 billion per month, had come to Rs5 billion after the retirement age was increased saving the province Rs10 billion in six months.

The minister, however, said that after the high court’s verdict, the pension bill surged to Rs7.5 billion per month and it cost the province Rs13 billion in the last eight months.

He said that managing the province’s growing pension bill had become a big challenge for the government to handle.

“The pension bill has grown equal to the development budget for settled districts of the province. This year, the development budget stands at Rs104 billion, while the pension budget totals Rs86 billion, which is unsustainable,” he said.

Mr Jhagra said that nowhere in the world, pensions were funded by governments from annual budgets.

He said that though the issue was debated for around 25 years, the successive governments didn’t take any action to fix it.

The minister said that the current provincial government soon after its formation decided to reform the pension system and introduced those changes to the Civil Servants Act.

He said that around 15 years ago, the province’s pension budget amounted to Rs1 billion or close to one per cent of the Rs80 billion total outlay but it jumped to Rs86 billion or 18 per cent of the estimated budget of Rs500 billion.

Mr Jhagra said that the pension bill was increasing at the rate of 20 to 22 per cent annually and it was likely to jump to Rs130 billion by the end of the current government’s five years tenure.

He said that without any action, pension would have jumped up to Rs507 billion in a decade and that it would have amounted to half of the province’s budget.

The minister said that a recent State Bank of Pakistan report had also urged the federal and provincial government to take immediate steps to arrest the galloping pension liability.

He said that the KP government was the first in the country to take pension reforms as it did in the case of the Sehat Insaf Card.

Mr Jhagra dispelled the impression that increasing the upper age limit would reduce employment opportunities and said that the government could spend savings generated in that way on development and job creation.

He said that 95 per cent of jobs created in the public sector were based on needs and not to fill vacancies.

The minister also denied that increasing upper age limit would reduce promotion opportunities for the government employees.

He said mostly, the existing system led to the delay in promotion and if such a problem was there, it could be resolved.

Published in Dawn, January 9th, 2021