PESHAWAR: The Khyber Pakhtunkhwa establishment department has drafted a bill to do away with the pension and gratuity facility for future government employees after retirement amid fears of the province’s pension liability reaching Rs300 billion in the next 10 years.

The proposed KP Civil Servant Amendment Act, 2022, will be tabled before the provincial assembly for mandatory approval following the cabinet’s nod.

In the draft amendment, the KP Civil Servant Act 1973’s Section 19, which entitles a government servant on retirement to pension or gratuity, has been replaced with a new section providing for the contributory pension fund for the future staff members of public sector department and organisations.

“A person to be appointed on regular basis to a service or post in the prescribed manner, on or after the commencement of KP Civil Servants Amendment Bill 202, shall for all intent and purposes, be civil servant, except for the purpose pension and gratuity, be entitled to receive such amount contributed by him towards contributory provident fund, along with the contributions, made by the government to his account in the said fund,” read Section 2 of the amendment bill.

Bill prepared for purpose as govt pension liability likely to reach Rs300bn in decade

However, those employed before the enactment of the proposed law shall be entitled to receive pension and gratuity as admissible to them under the pension rules.

A summary for the cabinet’s approval said due to huge financial implications of pension on provincial exchequer, the KP government intends to review the general provident fund and to change it with contributory provident fund as was applicable for in year 2005 for all new recruitment and postings.

Also, it noted that in 2002, the then government introduced terms and conditions for contractual employees with the aim of reducing pension liabilities.

Under the revised ToRs, all fresh recruitment were to be made on contract initially for a period of three years, though extendable through a fresh contract if required. These contractual employees were not entitled to general provident fund, pension and gratuity and only contributory provident fund was admissible to them. However, in 2005, through an amendment to the KP Civil Servant Act, 1973, all those hired after 2001 were regularised.

Later, the KP Employees (Regularisation of Service) Act, 2009, declared that services of those hired on contract and ad hoc basis deemed to have been validly appointed on regular basis having the same qualification and experience for regular post.

However, Section 19 of the KP Civil Servant Act, 1973, was amended again in 2013 wherein the entitlement of the civil servants to receive pension and gratuity who were appointed between 2001 and 2005 was restored.

In June 2021, the provincial cabinet had approved the KP Civil Servants Pension Rules, 2021, making major revisions to the pension rules.

The rules had rationalised beneficiaries of pensions to direct dependents and parents, limiting each beneficiary to receive a single pension whether self or family pension from provincial government and disallowing active employees from drawing family pension.

The documents also showed that the finance department had asked the provincial cabinet to amend the KP Civil Servant Act to provide to contributory pension fund in the Finance Act, 2021, but the cabinet decided against the inclusion of the proposal in budget.

The finance department, in its white paper for 2021-22, said the province’s pension bill was estimated to be around Rs92.1 billion for the current year, while the pensioners would total 169,358.

The white paper added that the over the last years, pension has been growing at compound annual rate of 14.5 per cent while in the same period province’s receipts grew by 8.1 per cent only.

“With this trend continuing, salaries and pensions will surpass the provincial receipts. Pension is one of the major expenditures for the provincial government and the significant rate of increase comes at the cost of squeezing development budget, as well as non-salary expenditure, which funds infrastructure improvements, textbooks for children in school and essential medicine for patients,” it said.

On the other hand, a finance department report quoting an actuarial study noted that the pension budget which stood at Rs92 billion was likely to jump to Rs300 billion over the next decade and would compel the provincial government to cut either pension budget or development budget.

Published in Dawn, February 6th, 2022