Pakistan Federal Pension Increase 2026: 7% on Baseline Pension From 1 July, Worked Out
Federal pensions in Pakistan rose 7% from 1 July 2026, worked out on baseline pension. See what baseline means and work out your new pension in 4 steps.
Federal government pensioners in Pakistan got a 7 per cent increase from 1 July 2026. The Finance Division announced it in an office memorandum dated 29 July 2026. The increase is worked out on your baseline pension, not on the total you receive today, so most pensioners get a little less than 7 per cent of their current payment.
Below we explain what baseline pension means, show the sum with a worked example, and list who the increase covers. Every rule here comes from Finance Division memorandums we read on its website.
The 2026 increase is 7 per cent of baseline pension, paid from 1 July 2026
The Finance Division approved a 7 per cent increase on baseline pension with effect from 1 July 2026. It covers all federal civil pensioners, civilians paid from defence estimates, retired armed forces personnel and retired civil armed forces personnel.
The memorandum is No.4(1)/REG.6/2026, issued on 29 July 2026. Because it came out four weeks after the start date, the July increase was due as arrears. If your July and August payments did not show it, ask your pension office about the arrears.
Baseline pension is your net pension, and every increase is kept separate
Baseline pension is the net pension worked out at retirement: gross pension minus the part you commuted, meaning the part taken as a lump sum. Each yearly increase is paid on this baseline and kept as a separate amount. Increases do not compound on top of each other.
This rule comes from a Finance Division memorandum of 1 January 2025, No.9(3)R-6/2024-403, titled "Future Increase Methodology in Pension". It was based on the recommendations of the Pay and Pension Commission 2020. It sets four rules:
- Net pension at retirement is the baseline pension.
- Any increase is granted on the baseline pension.
- Each increase stays a separate amount until the government reviews pension benefits.
- A Pay and Pension Committee reviews the baseline every 3 years.
For people who were already pensioners on 1 January 2025, the baseline is the pension they were drawing on that date. When a commuted portion is restored, the baseline is treated as including it.
Work out your 2026 increase in 4 steps
Find your baseline, multiply by 0.07, and add the result to what you already receive. For someone already retired before 2025, the baseline is the January 2025 pension, so the 2026 increase is the same rupee amount as the 2025 one.
- Find your baseline pension. If you retired before 1 January 2025, it is your monthly pension on that date. If you retired later, it is your net pension at retirement, plus the adjustments explained below.
- Multiply the baseline by 0.07. That is your monthly 2026 increase.
- Add it to your June 2026 pension. The result is your pension from 1 July 2026.
- Check your bank credit for July onwards. If the July 2026 increase is missing, it should come as arrears.
Worked example. A pensioner drew Rs 40,000 a month on 1 January 2025, so that is the baseline. The 2025 increase of 7 per cent added Rs 2,800, making Rs 42,800. The 2026 increase is 7 per cent of the same Rs 40,000 baseline, another Rs 2,800. The new pension is Rs 45,600 a month.
Under the old compounding method, 7 per cent of Rs 42,800 would have been Rs 2,996. So the baseline method pays this pensioner Rs 196 a month less. That is the main reason pensioners see less than 7 per cent of their current payment.
New retirees get earlier increases folded into the baseline
If you retire on or after 1 July 2026, you still get the 2026 increase. The memorandum also says the 15 per cent increase of July 2022 and the 7 per cent increase of July 2025 stay admissible to employees retiring on or after that date.
An earlier clarification, dated 5 August 2025, set the baseline for people retiring on or after 1 July 2025. Their baseline is the net pension plus these past increases:
| Increase | Finance Division memorandum date |
|---|---|
| 15% | 4 July 2011 |
| 7.5% | 7 July 2015 |
| 15% | 1 July 2022 |
| 17.5% | 5 July 2023 |
| 15% | 10 July 2024 |
The memorandum does not spell out how these are added together, so ask your accounts office for the figure on your pension papers. How a federal pension is first calculated, and the papers needed, is set out in how a government pension case is filed.
The increase also covers family pension, with a few exceptions
The 7 per cent increase applies to family pension under the Pension-cum-Gratuity Scheme 1954 and the Liberalized Pension Rules 1977. It also applies to extraordinary pension and to compassionate allowance under CSR-353.
It does not apply to the special additional pension paid instead of a pre-retirement orderly allowance, or to the money value of a driver or orderly. Where a pension is shared with a provincial government, the cost of the increase is split between the two in proportion.
Provincial pensioners are not covered by this memorandum. Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan announce their own pension increases through their finance departments.
A 7 per cent rise is below the current inflation rate
Consumer prices in Pakistan rose 10.26 per cent in the year to September 2026, according to the Pakistan Bureau of Statistics. A pensioner whose payment rose 7 per cent, or less under the baseline method, is losing buying power. Our report on inflation in September 2026 shows which prices rose most.
Two practical steps help. Pension income up to Rs 10 million is taxed at 0 per cent, so you only need to file a tax return as a pensioner to stay on the active taxpayers list. And savings kept in a Pensioners' Benefit Account paid 12.72 per cent from 1 October 2026, above inflation.
Common questions
How much is the federal pension increase in 2026?
7 per cent of baseline pension, with effect from 1 July 2026, under Finance Division memorandum No.4(1)/REG.6/2026 dated 29 July 2026.
What is baseline pension?
Net pension at retirement, meaning gross pension minus the commuted portion. For those already retired on 1 January 2025, it is the pension they drew on that date.
Why is my increase less than 7 per cent of my current pension?
Because the increase is 7 per cent of the baseline, not of the pension after earlier increases. Each increase is kept as a separate amount and does not compound.
Does the 2026 increase apply to family pension?
Yes. The memorandum applies it to family pension under the 1954 scheme and the 1977 rules, extraordinary pension and compassionate allowance under CSR-353.
Do provincial pensioners get this increase?
No. This memorandum covers federal pensioners and retired armed forces personnel. Provinces issue their own pension increase notifications.
How we verified this
What we checked, where we read it, and what we could not confirm.
Last checked 10 October 2026, about 9:00 pm PKT. We read three Finance Division memorandums on its circulars page: No.4(1)/REG.6/2026 of 29 July 2026 (the 2026 increase), No.9(3)R-6/2024-403 of 1 January 2025 (baseline method), and No.4(1)REG.6/2025 of 5 August 2025 (baseline for new retirees). Inflation is from the PBS monthly price review for September 2026, and the Pensioners' Benefit Account rate from the National Savings rate sheet effective 1 October 2026. The worked example is our own arithmetic.
About the author
Global Affairs & Political Economy Writer
Muhammad Hatim is a book lover who started writing because he enjoys it. At Pakistan Era he writes about international relations, geopolitics and the global economy, with a particular interest in South Asia and the forces behind current events.
