How government pension and commutation are calculated in Pakistan (2026)

By Bilal Naeem · Updated: 13 October 2026

Work it out with the Pension calculator →

A federal government employee’s gross pension is 7/300 of their average pensionable emoluments over the last 24 months for each year of qualifying service, up to 30 years, which is 70%. Up to 35% of it can be commuted for a lump sum equal to the commuted monthly amount × 12 × the commutation factor for your age. This applies to federal civil servants appointed before 1 July 2024.

The three parts of a pension

1. Qualifying service

A pension needs at least 10 years. With 5 to 10 years, a gratuity is paid instead.
Fractions of a year are ignored (CSR 468), but a shortfall of up to six months is condoned (CSR 423), so six months or more at the end count as a full year.
No more than 30 years count. Non-qualifying periods such as extraordinary leave are left out.

2. Pensionable emoluments

Since 1 January 2025, pension is based not on last pay but on the average pensionable emoluments of the last 24 months of service. These are basic pay and the other pay the rules count as emoluments; allowances such as ad hoc relief allowances do not count. Under Finance Division’s clarification of 4 March 2025, a usual increment due in the year of retirement is added after averaging.

3. The pension scale

Gross pension = average emoluments × 7 × years ÷ 300.

Qualifying service	Share of average emoluments
10 years	70/300 = 23.33%
15 years	105/300 = 35%
20 years	140/300 = 46.67%
25 years	175/300 = 58.33%
30 years	210/300 = 70%

Commutation

Commutation means giving up part of your monthly pension in return for a lump sum at retirement. You can commute up to 35% of gross pension.

Commuted pension = gross pension × the share you choose.
Lump sum = commuted monthly pension × 12 × the commutation factor.
Net monthly pension = gross pension − commuted pension.

The factor comes from the official commutation table, Annex-II to Finance Division’s O.M. of 4 September 2001 (corrected on 30 January 2002). The age used is your age next birthday, or 60 if you retire on superannuation.

Age next birthday	Commutation factor
50	18.3129
55	15.1478
58	13.434
59	12.8953
60	12.3719
61	11.8632
62	11.3684
65	9.9639

The table runs from age 20 to 80. The younger you are, the higher the factor, because you will draw the reduced pension for longer.

Worked examples

30 years of service

Average emoluments over the last 24 months Rs 150,000, 30 years of service, 35% commutation, age 60.

Gross pension: 150,000 × 7 × 30 ÷ 300 = Rs 105,000
Commuted pension: 35% of Rs 105,000 = Rs 36,750 a month
Net monthly pension: Rs 68,250
Lump sum: 36,750 × 12 × 12.3719 = Rs 5,456,008

22 years and 7 months of service

Average emoluments Rs 90,000. The 7 months are more than six, so 23 years count, which is 53.67% of average emoluments. Gross pension Rs 48,300, commuted Rs 16,905, net pension Rs 31,395 a month and a lump sum of Rs 2,509,764.

Work out your own estimate with the pension calculator.

Voluntary retirement

Since 10 September 2024, voluntary retirement after 25 years of service reduces gross pension by 3% for each year left until superannuation, up to 20%. The examples above assume retirement at the superannuation age.

Tax on pension, commutation and gratuity

Commutation of pension received from the government is exempt (Second Schedule, clause (12)), and a government employee’s gratuity under the service rules is exempt too (clause (13)).
Pension from a former employer is taxed as a final tax at 0% up to Rs 10 million a year and 5% on the amount above that. Once you are 70, pension is not taxed (section 12(2A)).
If you keep working for the same employer or an associate after retirement, the pension is taxed at the normal salary rates.

The contributory pension scheme for new entrants

Under Finance Division’s O.M. of 20 August 2024, all federal civil employees (including civilians paid from defence estimates) appointed on a regular basis on or after 1 July 2024 are under the Contributory Pension Fund Scheme, as are armed forces appointments from 1 July 2025. The employee contributes 10% of basic pay and the government 20%, and the O.M. says these rates are provisional and may change. The 7/300 formula and commutation above do not apply to them; their pension will depend on what builds up in the fund. We have not found an official document setting out how the fund is paid out at retirement, so we do not describe it here.

What this guide does not cover

Provincial employees: provinces have their own pension rules and notifications, which may differ from the federal ones in dates or detail. Check with your provincial Accountant General.
Armed forces: they have separate pension rules.
Family pension: the pension paid to the family when an employee or pensioner dies has its own rates and conditions.
Invalid or compulsory retirement, and the increases in pension announced in budgets after you retire.

What to do before you retire

Check your service book: all your service should be recorded, and any extraordinary leave or breaks correct.
Collect your last 24 months of payslips and work out your average pensionable emoluments yourself.
Decide how much to commute. You make the choice on Pension Form-25 (Revised 2016), which your office sends with your pension case to the Accountant General (AGPR). The final calculation is done there.
Plan for the lump sum. For example, the Pensioners’ Benefit Account pays 12.72% a year from 1 October 2026, monthly; on the Rs 5,456,008 above that is about Rs 57,834 a month. See the National Savings calculator and National Savings schemes compared.

Common mistakes

Working it out on last pay. Since 1 January 2025 the 24-month average is used, which is usually lower than last pay.
Counting more than 30 years, or forgetting the six-month rule.
Thinking 35% commutation means a lump sum of 35% of something. It is the commuted monthly pension × 12 × the factor, which at 60 is about 148 months of the commuted amount.
Assuming every pay increase announced in a budget is pensionable. Allowances such as ad hoc relief do not count as emoluments.

Frequently asked questions

Is pension calculated on last pay or average pay?

Since 1 January 2025, federal pension is worked out on the average of the pensionable emoluments drawn in the last 24 months of service, not the last pay. A usual increment due in the retirement year is added after averaging.

What is the maximum pension?

70% of average emoluments, reached at 30 years of qualifying service. Service beyond 30 years does not raise the pension.

Is commutation compulsory?

No. You can commute any share up to 35% of gross pension, or none. Commuting gives a lump sum now but lowers your monthly pension for life by the commuted amount.

Is pension or commutation taxed?

Commutation of pension from the government is exempt. Pension from a former employer is taxed at 0% up to Rs 10 million a year and 5% above that, and not at all once you are 70. If you keep working for the same employer, the pension is taxed at the normal salary rates.

I joined federal service after 1 July 2024. Will I get this pension?

No. Civil employees of the Federal Government appointed on a regular basis on or after 1 July 2024 are under the Contributory Pension Fund Scheme: 10% of basic pay from you and 20% from the government. Finance Division says these rates are provisional.

What if I retire with less than 10 years of service?

A pension needs at least 10 years of qualifying service. With 5 to 10 years, a gratuity is paid instead of a pension.

Calculators for this guide

Sources

This guide explains the rules for general information. It is not official, legal or tax advice. Rules change, so check the official source or a qualified professional before acting. See how we check our information.