3% penalty on premature retirement explained

ISLAMABAD: The Ministry of Finance has explained that deduction of 3 percent penalty on premature retirement for public servants will be applicable for premature (voluntary) retirement on or after the issuance of Finance Division notification dated 10-9-2024.

When asked whether 3% annual flat reduction applicable to government employees who have opted for voluntary retirement before issuance of Finance Division O.M. 10-09-24 and currently on Leave Preparatory to Retirement (LPR), or availing encashment of LPR, or those under a notice period, the Ministry of Finance replied that the decision does not apply to the government employees currently on Leave Preparatory to Retirement (LPR), or availing encashment of LPR, or those under a notice period for premature (voluntary) retirement.

However, the reduction will be applied to the gross pension of all those employees who have or would have applied for premature (voluntary) retirement on or after the issuance of the Finance Division’s dated: 10-09-2024.

To another query whether the 3 per cent reduction rate shall also be applicable to civil employee after completion of 30 years, the Finance Ministry replied, Yes!

Whether the OM is applicable to existing employees or will be applicable or will these be applicable on new entrants only. As per existing pension formula, a maximum benefit of 30 years of service is admissible in pension.

If a pensioner served for more than 30 years and got voluntary retirement, a reduction of 3% per year in gross pension from the date of retirement to the date of superannuation will result in double financial loss to him/her as on the other side there is no benefit for extra years of service beyond 30 years and on the other side 3% reduction in grass pension per year from date of retirement to date of superannuation.

In this regard, two different views come forth: either the service benefits for pension may be extended to the actual length of service be on 30 years of service) or the reduction may be limited to 30 years of service rather than to date of superannuation.

The Special Family Pension as used in Finance Division O.M. dated 10.09.2024 is admissible to Shuhada of Armed Forces/Civil Armed Forces only.

The Special Family Pension after the death or ineligibility of the spouse/first recipient shall remained admissible for accumulated period of 25 years only, to the family members as per eligibility criteria, share of Special Family pension, priority and manner set in Pension Regulations Vol-I (Armed Forces), 2010.

The condition of 25 years is not applicable to existing Special Family pensioners who shall be treated as per the terms and conditions under which they were originally granted Special Family Pension. However, the rate revised under Para 1(iii) of Finance Division’s O.M. dated 10.09.2024 will be admissible to existing Special Family pensioners w.e.f. 10.09.2024.