Effective Management of Provincial Pension Liability

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Pension expenditures have become a critical fiscal challenge for the Government of Punjab, surging to Rs. 312 billion in the fiscal year 2022-23. The accrued pension liability now stands at Rs. 6.5 trillion, significantly constraining the government's capacity for current and development expenditures. This study explores the existing regulatory framework for pension liability management and proposes actionable solutions based on global best practices. Through a comprehensive methodology that includes literature reviews, data analysis, comparative studies of national and international practices, and stakeholder interviews, the research highlights alarming trends: a 300% increase in government revenues over the past decade, contrasted with a staggering 650% rise in pension costs. Key contributors to this fiscal burden include the Defined Benefit pension scheme, regularization of temporary employees, and adverse judicial rulings. To address these challenges, the study recommends transitioning to a contributory pension scheme, reducing commutation rates, aligning pensionable pay with basic pay, indexing pension increases, and leveraging biometric verification systems. Additionally, amendments to the Civil Servants Act and better management of the Punjab Pension Fund are proposed to ensure fiscal sustainability. These measures aim to mitigate the growing financial strain, ensuring long-term stability and efficient pension liability management for the Government of Punjab.