On 15 January 2013, the Provincial Assembly voted to amend the Khyber Pakhtunkhwa Civil Servants Act 1973, abolishing the Contributory Provident Fund Scheme introduced in 2005. Under the scheme, the right to pension and gratuity had been withdrawn from all the civil servants appointed after 1 July 2001. The
Provincial Assembly’s Standing Committee on Law had declared the 2005 amendment unconstitutional in August 2012 and recommended that the assembly re- examine the bill.
The provincial government will now provide pension benefits to all classes of employees who have served for 10 years or more. The amendment is said to benefit about 55,000 employees.14 The government servants who have more than five but less than ten years of ser- vice, and who either wish to leave the service or retire, will be granted a gratuity as a lump sum payment. The categories of pension include the following:
Superannuation Pension: Granted on attain-
ment of age of superannuation (60 years).
Retiring Pension: Granted to those who apply
for retirement after 25 years of service. Also granted to those who are compulsorily retired. The pension is calculated according to the per- son’s years in service.
Invalid Pension: Granted to those who become
physically or mentally incapacitated, as certi- fied by a medical board.
Compensation Pension: Granted to those
whose posts have been abolished and they have not been offered an alternative post.
Pensions are also granted to spouses/family members of deceased provincial government servants. Widows are granted pension for life or until they remarry, while widowers are granted pension for 10 years after the death of the spouse. If both parents are deceased, sons have a right to claim pension until the age of 21, while unmarried daughters can claim a parent’s pension un- til they are married or until they attain the age of 21, whichever comes earlier.
The Contributory Provident Fund Scheme was launched in Khyber Pakhtunkhwa due to the realisation that the government’s largely unfunded pension liability was becoming a financial time-bomb. In 2012-13, the pro- vincial government allocated an amount of Rs21.6 bil- lion – constituting 28.4% of the total non-salary bud- get expenditure – to the payment of pensions.15 These payments are reportedly made to about 150,000 indi- viduals and this number is expected to substantially in- crease in the coming years as life expectancy improves. The decision to extend pension benefits to all the pro- vincial government servants who were employed after
1 July 2001 will have a significant financial impact too and the pension payments are expected to increase by at least 30% in the short- to medium-term.16 The pen- sions are mostly funded out of the provincial budget; however, the government established a pension fund in the late 1990s to make strategic capital investments and help reduce the budget implications of the pension bill. The fund currently has a capital of Rs12.5 billion and its profits, which do not amount to more than Rs12 million annually, go towards payment of pensions. Along with its financial implications, the management of the pension liability has also become a problem for the Government of Khyber Pakhtunkhwa. According to unofficial reports, a provincial government audit mission that visited 11 districts found that commercial banks were failing to distinguish between the pension- ers of different governments (federal and provincial) and record keeping of pension vouchers was so poor that many federal government employees, or employ- ees of other provincial governments who had retired and were based in Khyber Pakhtunkhwa, were receiv- ing pension payments from the coffers of the Govern- ment of Khyber Pakhtunkhwa.17
4.4.1.1 Analysis
a) Targeting efficiency: Pension payments are
meant for civil servants. Though they are tar- geted at a specific group, poor management systems can occasionally result in inefficien- cies; for example, provincial government mak- ing payments to federal government employ- ees. High.
b) Extent of programme coverage: Before the
passage of an amendment to the Civil Servants Act in January 2013, the pension programme did not cover employees recruited after 1 July 2001. However, this anomaly has now been corrected and from 2013-14, the pension pay- ments will be made to all provincial govern- ment employees. The programme covers a fairly large number of people since the govern- ment is a key employer in Pakistan, but it is not meant for the general public. Medium.
c) Degree of ease of access: Pensioners are re-
quired to appear in person at the designated bank to receive pension payments. If the pen- sioner is disabled, infirm or otherwise unable to travel, he/she has to produce a medical certificate to get an exemption to the personal
appearance rule. Field representatives of the Accountant General’s office may also visit the residence of the pensioner to ascertain his/her state. In cases where the pensioner is unable even to sign documents, the medical certifica- tion must state the same, and physical verifi- cation from the Accountant General’s office becomes necessary. There is relative ease of access to pensions provided the beneficiary is physically able to travel and can sign docu- ments. If this is not the case, access can be more difficult. Medium.
d) Percentage of programme expenditure dedi- cated to benefits: The pension bill of the Khy-
ber Pakhtunkhwa government is more than a quarter of the government’s non-salary expen- diture in any given fiscal year. With the exten- sion of benefits to more employees as of Janu- ary 2013, this fiscal burden is likely to increase. In addition to the Accountant General’s office in Peshawar, the department has 7 posts for District Controller of Accounts, 17 posts for Se- nior District Accounts Officers, and 7 Agency Accounts Officers. The administrative costs of the programme are less than 5% of the to- tal value of pension disbursements each year. High.
e) Adequacy of support: The maximum pen-
sion rate is determined at 70% of the last pay drawn on completion of 30 years of service. For less than this period, the pension amount is accordingly reduced. In case of death of the pensioner, widows get 50% of the last pension drawn by the retiree. As per revision of pay scales in July 2011, pensions of those who re- tired before 1 July 2002 increased by 15% of the net pension, while pensions of those who retired later were increased by 20% of the net pension.18 While pensions are increased from time to time, they are not pegged to inflation. Many pensioners thus rely on savings or on other forms of family support to make ends meet after retirement. Medium.
f) Grievance redressal: Pensioners have to ap-
proach the office of the Accountant General (Pension Functions Section) or District Ac- counts Officers if they have a grievance. The process of redressal can be long drawn out. Medium.
tainability: The Government of Khyber Pak-
htunkhwa’s pension programme is almost en- tirely unfunded and amounts for disbursement are allocated in the provincial budget, without any corresponding deductions from payrolls. There is limited investment of pension funds. The pension bill is therefore a major liability and is not a sustainable expenditure. Low.
h) Exit mechanisms: To the extent that the pen-
sion disbursement requires the presence of ei- ther the pensioner himself/herself or his/her spouse, unmarried daughter or underage son, the possibility of abuse by non-eligible claim- ants is low. Since the pension payment is for life for the pensioner and for a widow, there is no need for establishing exit mechanisms. Cases where pensions accrue to underage sons can be similarly easily dealt with since sons have to produce proof of age when drawing the pension. It may be difficult to detect cases of daughters of deceased parents who marry before 21 and continue to claim the pension, though such cases are likely to be few. High.
i) Degree of impact on the MDGs: Pensions are
a form of income support for the non-working age population, thus they contribute to achiev- ing MDG 1. To the extent that pensions are used to access basic health facilities for the ex- tended family or get treated for communicable diseases, they contribute to achieving MDGs 4, 5 and 6.
j) Programme potential to be extended to the RAHA target group: Retired civil servants
settled in the RAHA target districts would au- tomatically benefit from the pension scheme, though it cannot be extended to the general population.
4.4.2 Government of Khyber Pakhtunkhwa