Planning for Retirement in Pakistan: Why a Pension Should Match Your Salary

2 hours ago

A good retirement plan should help you keep living after you stop working. In Pakistan the government does provide some retirement support. It is limited—especially for people working in the formal private sector. That is why saving and investing on your own is so important if you want a pension that's at least equal to your final salary and keeps up with inflation.

Does Pakistan have a retirement system?

Yes Pakistan has than one retirement system. Federal government employees have their pension scheme while many private-sector workers are covered by EOBI. Government employees and armed-forces personnel are usually not part of EOBI because they have pension arrangements.

In general government employees have a retirement deal than private-sector workers. EOBI is helpful. It does not fully replace a persons salary after retirement.

EOBI calculates its pension using the average notified monthly wage and the number of years a person has worked in insurable employment. It does not use the workers final salary. So someone who earned a salary during their career may still get a pension that is much lower than what they used to earn.

The contributions are also small: the employer pays 5%. The employee pays 1% but these are calculated on the prescribed minimum wage, not necessarily the workers full salary. The minimum EOBI pension has been reported at PKR 11,500 per month. That may help with expenses but it is not enough to maintain a normal lifestyle for most people.

There is another problem too. Many Pakistanis work in jobs, agriculture, small businesses or as self-employed people. For them EOBI coverage may be weak or completely missing.

My retirement goal

I am self-employed. I do not get the same retirement benefits as government employees or workers in registered companies. Because of this I try to invest a part of my income in National Savings schemes. I also have a life-insurance plan. These are first steps but I know they are not enough.

My ideal goal is simple: after retirement I want to receive least 100% of the salary I was earning before I retired. If I earn PKR 100,000 a month before retirement I would like to receive at PKR 100,000 a month after retirement.

For me a pension equal to my salary is the minimum target. If it can be a little higher even better because older age often brings medical and living costs.

Honestly I do not yet have a plan to reach this goal.. I understand the problem and I am trying to build a better plan step by step.

When I get closer to retirement I would move some of my savings into investments that give income. I would also keep some money invested for growth so my income does not lose value because of inflation.

Pakistan does have retirement institutions, including EOBI for private-sector workers and separate systems for government employees.. If your goal is a pension equal, to your salary and rising with inflation, EOBI and life insurance alone are not enough. A strong plan needs saving, personal investing, employer benefits where possible and a clear strategy to handle inflation after retirement.