The government has proposed to set up a contributory pension scheme for civil servants under which they will pay 6 percent of their monthly salary into the plan, and the government will match the amount of money that they contribute.

A bill to set up the fund was tabled in Parliament on Friday. “The provision will reduce the financial liability of the government while providing an opportunity to the government to mobilise surplus amounts in the productive sector,” states the bill.

As per the statement issued by Finance Minister Yubaraj Khatiwada, the contributory pension plan will be made effective for all civil servants appointed from the commencement of the fiscal year 2018-19. “At a time when the government has been facing an increasing liability of pension amount, the new provision will be made mandatory to run various types of social security schemes.”

Civil servants who have served for at least 20 years will be eligible to receive a pension. Retired government employees will receive a pension equivalent to 2 percent of the salary for the final month multiplied by the number of years of service.

For instance, if an employee retires after 20 years of service and his last drawn salary was Rs30,000 per month, the pensioner will receive a monthly pension of Rs12,000.

The government will raise the pension amount by 10 percent every three years. If the person receiving the pension dies, the spouse will receive 50 percent of the pension amount. If both parents die, the children will receive the pension amount till they reach the age of 18 years.

Amid concerns that the current practice of the national treasury paying pensions may not be sustainable, the government has proposed to set up a contributory pension system in the Federal Civil Service Bill. The move is in line with the recommendation of the Federal Administrative Restructuring Committee.

The government has allocated Rs46.86 billion for pensions and disability allowances in the current fiscal year. State spending on pensions has been rising steadily in recent years with the government spending Rs26.01 billion in fiscal 2015-16 and Rs34.98 billion in fiscal 2016-17. As per government statistics, 250,600 civil servants received pensions worth Rs40 billion in the last fiscal year. Pension payments have almost doubled in the past seven years.