Long-term financial sustainability: EOBI estimates over Rs237bn deficit by FY37

ISLAMABAD: The Employees’ Old-Age Benefits Institution (EOBI) has projected a deficit of Rs237.048 billion by 2036-37 and indicated that an increase in the contribution collection rate from employers, along with additional contributions from the Federal Government, would be required to bridge the funding gap, well-informed sources told Business Recorder.

The issue of EOBI’s long-term financial sustainability came under discussion at a meeting of the Economic Coordination Committee (ECC) of the Cabinet, which approved the budget proposals of the Ministry of Overseas Pakistanis and Human Resource Development (MoOP&HRD) with a direction to submit revised budget estimates.

The MoOP&HRD apprised the ECC that EOBI was established under the Employees’ Old-Age Benefits (EOB) Act, 1976 as an autonomous organisation mandated to provide pension benefits to employees in the private sector. Its management and administration are entrusted to a tripartite Board of Trustees comprising representatives of the Federal and provincial governments, employers and employees, headed by the Secretary MoOP&HRD.

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The institution’s core functions include registration of industries and employees, collection of contributions, disbursement of pensions, grievance redressal for employers and management of its funds.

According to the ministry, EOBI is currently extending benefits to approximately 430,000 insured persons and their survivors, including old-age pension, survivor’s pension, invalidity pension and old-age grant. The minimum pension was increased from Rs10,000 to Rs11,500 per month with effect from July 31, 2025.

The ministry informed the ECC that EOBI’s contribution receipts have increased significantly, rising from Rs39 billion in 2022-23 to Rs60 billion in 2023-24 and Rs80 billion in 2024-25.

Investment income also increased from Rs57.059 billion in 2022-23 to Rs68.584 billion in 2023-24 and Rs77.617 billion in 2024-25. Consequently, total receipts rose from Rs96.059 billion to Rs128.584 billion and then to Rs158.572 billion during the three years.

Pension disbursements, however, also continued to rise, increasing from Rs51 billion in 2022-23 to Rs57.1 billion in 2023-24 and Rs59.506 billion in 2024-25. The number of pensioners increased from 411,235 in 2022-23 to 424,750 in 2023-24 and 436,175 in 2024-25.

According to the 12th Actuarial Valuation Report of EOBI Assets and Liabilities as of June 30, 2024, contributions are projected to continue growing, but rising pension payments are expected to put increasing pressure on the fund.

The actuarial projections show that EOBI’s fund balance is expected to peak at Rs629.1 billion in 2028-29 before beginning to decline. Although contributions are projected to grow at an average annual rate of 10.22 percent, this growth would not be sufficient to offset rising pension liabilities over the longer term.

Under the existing parameters, the fund is projected to face a deficit of Rs237.048 billion by 2036-37, highlighting the need for sustainable financial measures, including an increase in the contribution collection rate from employers and additional contributions from the Federal Government.

The ministry further informed the ECC that under Section 19(1) of the EOB Act, the institution is required to prepare its annual budget and submit it to the Board of Trustees for clearance before obtaining approval from the Federal Government.

The Board of Trustees, at its 136th meeting held on June 26, 2025, cleared the budget proposals for 2025-26 and revised budget estimates for 2024-25.

According to the budget details, EOBI’s total receipts for 2024-25 were initially estimated at Rs155.086 billion but were revised upward to Rs158.572 billion. The budget estimate for 2025-26 was set at Rs170.900 billion.

Revenue expenditure for 2024-25 was estimated at Rs77.080 billion and revised to Rs62.999 billion, while the estimate for 2025-26 was Rs86.937 billion.

Capital expenditure for 2024-25 was initially estimated at Rs7.711 billion but was revised substantially to Rs63.825 billion, while the estimate for 2025-26 was Rs8.357 billion.

Total expenditure for 2024-25 was estimated at Rs84.791 billion and revised to Rs63.825 billion, while total expenditure for 2025-26 was budgeted at Rs95.294 billion.

The compulsory contribution towards the EOB Fund for financing deferred pension liabilities was estimated at Rs78.005 billion for 2024-25 and revised upward to Rs95.573 billion. The estimate for 2025-26 was Rs83.963 billion.

Management expenses as a percentage of contribution collection and investment were estimated at 1.99 percent for 2024-25 and revised to 1.58 percent, while the estimate for 2025-26 was 2.22 percent.

The Finance Division, while supporting approval of the EOBI budget estimates for 2025-26 and revised estimates for 2024-25, emphasised that EOBI must ensure availability of sufficient funds to effectively perform its core function of providing benefits to employees for whom the fund was established.

During the ECC discussion, stakeholders pointed out discrepancies in the communication of facts relating to investment profits, pensions and contributions over the preceding two years. The proposal was subsequently approved with a direction to the ministry to submit revised budget estimates.

Copyright Business Recorder, 2026