Payment of pensions is a serious issue confronting the already economically challenged Pakistan. The bill at federal and provincial levels has already crossed Rs1 trillion. All indications suggest that the pension expenditure will grow further in the years to come. Now that Ms Nargis Sethi will head the Pay and Pension Commission, the first thing she needs to focus on is to rationalise the anomalies in the pay scales. The existing pay-as-you-go (PAYG) or defined benefit (DB) schemes not only increase our fiscal deficits, they also do not guarantee maximum benefits for pensioners.

One suggestion that can bring the surging pension bill under control is if the superannuation age is increased from 60 to 65 years. Also, the commission must form new rules for new entrants and revisit the list of beneficiaries falling under the definition of “family.” Besides, Pakistan, like most developing countries, has weak provisioning for pensions. Unfunded pensions cover most government jobs. The commission must focus on the development of pension funds that have been largely ignored.

While removing the discrepancies in the pension scheme and improving the overall regime are the two urgent issues, the Chairman must also realise that our pension system is antiquated. In today’s increasingly digital world, making personal visits to banks for receiving pensions is redundant. The current mechanism is neither helping the pensioners is not a cost-effective method. Pakistan needs a centralised pension disbursal system that works digitally.

Undoubtedly, the government has assigned the Pay and Pension Commission with a gigantic task of overhauling the existing pay and pensions of the country. But it is not impossible. Yet, the commission must understand that parametric or minor reforms do not provide a permanent solution to the fiscal problems created by the current pension system. To find a permanent solution, the commission must convince the government on implementing systematic reforms.