Government Announces Pension Increase for Retired Employees

The federal government has officially notified a 7% increase in pensions for all retired government employees, effective July 1, 2025.

Pension Hike for All Sectors

According to a notification issued by the Ministry of Finance, this pension increase applies to retired personnel from the civilian sector, armed forces, and civil armed forces. It will also benefit individuals retiring on or after the mentioned date.

Government Tightens Expenditure Controls

In the same notification, the Ministry announced several cost-cutting measures to manage government spending. One of the major steps includes abolishing all vacant government positions that have been unfilled for the last three years.

The Ministry also reiterated that the ban on creating new posts remains in place.

Additional Restrictions Imposed

To further control spending in the fiscal year, the notification confirms restrictions on various expenses, including:

• Ban on purchase of government vehicles, machinery, and equipment
• Ban on overseas medical treatment

• Ban on non-essential foreign trips funded by public money

10% Salary Increase for Government Employees Also Notified

Earlier this month, the federal government issued a separate notification announcing a 10% increase in basic salaries of government employees as an Ad-hoc Relief Allowance.

Effective from July 2025

“The 10% increase will be based on the current basic salary under the head of Ad-hoc Relief Allowance.”
“It will be effective from July 1, 2025.”
“The President has approved a 10% Ad-hoc Relief Allowance 2025 for civil employees of the federal government, armed forces, civil armed forces, and civilian personnel receiving salaries from defense expenditure.”

Who Will Benefit

Contract employees under Basic Pay Scales will also receive this allowance. However:

• “This allowance will be taxable under the Income Tax Act.”
• “It will be admissible during general leave or Leave Preparatory to Retirement (LPR), but not during extraordinary leave.”
• “This allowance will not be included in the calculation of pension or gratuity, nor will it be considered for house rent deduction.”

• “It will not apply during foreign postings or deputations. Upon return from abroad, employees will receive the allowance according to the same rate and amount as during domestic posting.”

No Additional Budget Allocation

The notification concludes that funding for the Ad-hoc Relief Allowance 2025–26 will come from existing budgets of the respective ministries and departments. “No additional or supplementary grant will be issued for this purpose.”