Pension, provident fund liabilities: MoF seeks services of actuarial firm for valuation

ISLAMABAD: The Finance Ministry has sought the services of a qualified actuarial firm to carry out actuarial valuation of the pension and general provident fund liabilities of the federal government with projected cash flows and liabilities for the next 30 years and deadline for submission of proposal 25th January 2021.

The expected deliverables will be in the shape of reports containing actuarial assessment of pension liabilities at June 30, 2020, separately for civil servants and all employees of armed forces.

The Finance Ministry stated in the letter of invitation uploaded on its website that the government has recently constituted a Pay and Pension Commission to review the existing compensation and pension system of the federal and provincial governments with a view to bring improvements, therein, by addressing any distortions and by aligning the systems with the international best practices.

The commission, therefore, needs actuarial services to assess viability of the current pension system as well as to evaluate possibilities of creating an alternative pension system.

Scope of work included reports for pension, general provident fund, and medical schemes of the federal government separately for both civil servants and military service for all forms of pension systems applicable whether contributory pension funds or gratuities paid to contract employees.

Additionally, scope of work includes policy options for a new defined contribution pension scheme for new hires in the government; the assignment is required to be completed within six months of issuance of notice to proceed by the Finance Division; the valuation methodology will conform to the requirements of the applicable professional standards including the disclosures required there under and separate reports identifying actuarial valuation results for civil servants and military service shall be presented by the Actuary.

Giving background, the Finance Ministry added that the federal government at present employs some 1.36 million individuals in a number of positions.

These 1.36 million individuals are then further sub-divided between the civil government and the military.

At present there are 1.8 million federal pensioners and the total pension bill is approximately Rs500 billion per year.

The government employment is largely pensionable service in some form and the pension scheme for regular civil servants and government servants is a defined benefit scheme. The regular pension system of the federal government is regulated through a number of laws, rules and regulations such as the Civil Servant Act of 1973 and the Civil Service Regulations (CSR) as well other statutory instruments.

Copyright Business Recorder, 2021