Old Age Benefits

Old Age Consequence

Old ageconsists of ages nearing or
surpassing the life expectancy of
human beings, and thus the end of
the humanlife cycle.
They have limited regenerative
abilities and are more susceptible to
disease, syndromes, and sickness.
So no money source for living

Government Role
Defining Old age benefits:
The government secure the old age
of a person by defining financial
solutions in terms of benefits.
Old age benefits mean the systems
to enable every citizen to lead a
worthy life as a member of cultured
society

Old Age Benefits

The benefits ensure the minimum
level of living to the needy by public
assistance, and they also promote
public health and social welfare.

Benefit

Employment Injury Benefits

Sickness and Health-care
Unemployment benefits
Family benefits
Retirement Benefit
Pensions

History

History

First time the US introduced the

concept in 1935 as old-age, survivors
and disability insurance program for
the welfare of their employees.

History
The United Nations Declaration of
Human Rights adopted in the
December, 1948 states that:
Everyone has the right to security in
the
event
of
unemployment,
sickness,
disability, widowhood, old age or other
lack of livelihood in circumstances
beyond his control

Fitting the Standard Model to

Pakistan
Government/
Public Sector

Government Pension and

Contributory Provident Fund

Large/Medium
Private Sector

EOBI

Pension,
Gratuity, PF

Small/Private/
Self Employed

Agricultural
Workers

Mandatory
State Pension

Occupational
Schemes

VPS

VPS

?
Individual
Ret. A/cs

GRATUITY
Gratuity is actually a benefit for services
rendered in the past. It is a reward of good,
efficient and faithful service for a substantial
period of time. Before 1972, gratuity was paid
by an employer either on voluntary basis or in
consequence of an award by a labor court.
However, the Labour Laws Amendments
Ordinance, 1972 made payment of gratuity a
legal obligation. Amendments were
subsequently made in the Standing Order 12
of West Pakistan Industrial and Commercial
Establishments (Standing Orders) Ordinance
1968. Gratuity is now a statutory right for

EOBI

Introduction to EOBI
EOB Act 1976 was enforced with effect
from April 01, 1976, to achieve the
objectiveof Article 38 (C) of the
Constitution, by providing for
compulsorysocialinsurance. It extends
following benefits to insured persons or
their survivors:
Old-AgePension
Survivor's Pension
Old-Age Grant

Article: 38
Promotion of social and economic wellbeing of the people.
The State shall
Secure the well-being of the people,
irrespective of sex, caste, creed or race, by
raising their standard of living, by preventing
the concentration of wealth and means of
production and distribution in the hands of a few
to the detriment of general interest and by
ensuring equitable adjustment of rights between
employers and employees, and landlords and
tenants
Provide for all citizens, within the available
resources of the country, facilities for work and

Article: 38
Provide for all persons employed in the service of
Pakistan or otherwise, social security by compulsory
social insurance or other means
Provide basic necessities of life, such as food, clothing,
housing, education and medical relief, for all such
citizens, irrespective of sex, caste, creed or race, as
are permanently or temporarily unable to earn their
livelihood on account of infirmity, sickness or
unemployment
Reduce disparity in the income and earnings of
individuals, including persons in the various classes of
the service of Pakistan
Eliminate riba as early as possible

Employees Old age pension

ordinance in 1972 in Pakistan
Rules
Completion of 20 years of service
Retirement age was 60 for men and
women
Applied to those organizations who
have more than 100 employees

Employees old age pension

ordinance in 1975 in Pakistan
Better scheme was introduced in 23
December 1975
It was for industrial , commercial and
other organizations
Implement for those having at least
ten persons

employees Old age pension

ordinance in 1976 in pakistan
It was substituted by better amendments
on 5th april 1976
Implemented from 1st of july 1976
Benefits
Old-age benefits
Invalidity pension in case of disability
Old-age grant
Survivors pension
Minimum pension Rs 3000

Employees Oldage Benefits

(General), Regulations, 1980
Its is done on the following basis:
Calculation of daily wages for
determining Contribution excluding
holidays
Maintenance
of
records
and
submission of returns by employers
(insurable
employment,
their
occupations,
wages,
attendance,
dates of entry and exit insured
person's registration numbers )

EMPLOYEES OLDAGE BENEFITS

(GENERAL), REGULATIONS, 1980
Certificate of Authority (stated by act
12)
Proof of Age (submission of
documents)
Payment Contributions and liability of
Employer (stated in rules and
regulations)

CERTIFICATE OF AUTHORITY

Certification of Authority
form

Under Regulation No. 6 (I) of the Employees Old Age Benefits

(Gene*ral) Regulations 1980.
No...............

This is to Certify that

Mr. ............................................... .. whose

photograph and specimen signature appear below, is here by
authorized.
(a) to require an Employer to furnish to him such information
as he may consider necessary; OR
(b) at any reasonable tithe to enter any Establishment or other
premises occupied by such Employer and require any person
found in charge thereof to produce and allow him the examine
such account books and other documents relating to the
employment of persons and payment of wages or to furnish
him such information, as he may consider necessary;
OR
(c) to examine, with respect to any matter relevant to the
purposes aforesaid the Employer, his agent or any person
found in such establish*ment or other premises car any other
person whom the said official has reasonable cause to believe
to be or to have been air insured person.
Signature of Authorized Official

Specimen Signature
Place .

EOBI Limitations
EOBI theoretically forms the first pillar
There are, however, some significant issues
Very limited coverage
Serious concerns about viability, especially
following
the
withdrawal
of
the
Governments financial support
Significant
issues
with
respect
to
administration of the scheme
In the past some suggestions have been
made to convert the scheme into a defined
contribution one
Misplaced concept as the first pillar must,

Social Security

Social Security
Social security systems provide
countermeasures against the causes for
needy circumstances including illness,
injury, childbirth, disablement, death, old
age, unemployment and having a lot of
children by implementing economic
security measures through insurance or
by direct public spending.
These benefits are termed a social
security benefits.

Social- Security
Components
Old Age retirement- a compulsory
insurance program designed for
retirement benefits for people who
pay into the program.
Survivors benefits- paid to the
dependents of a deceased worker
who is fully insured.
Disability Benefits- paid to disabled
workers who meet certain eligibility

Elderly Population In
Pakistan

Strategic Plan of the

Social Security
Administration
Advance the economic security of the
nations people through
compassionate and vigilant
leadership in shaping and managing
Americas social security programs.

Strategic Plan of the

Social Security Administration
GOALS:

1)
Deliver high-quality, citizen-centered service
2)
Ensure superior stewardship of Social
Security programs and resources
3) Achieve sustainable solvency and ensure
Social Security programs meet the needs of
current and future generations
4) Manage and align staff to support the
Administrations mission.

Where does Pakistan stand on these

benefits?
Total social security
expenditure
(percentage of GDP)
All Countries

14.5%

Europe

24.8%

Asia

6.4%

India

2.6%

Pakistan

1.1%

Large amount of individual philanthrophy not documented

Source of Table : ILO - Social Protection - Financial, Actuarial and Statistical Services Branch - 1996

Pensions The World Bank

Model
Objective

Form

Financing

Redistribution

Minimum Pension

Tax Financed

Mandatory
State
Pension

Savings

Occupational
Pension

Fully Funded &

Regulated

Mandatory
Occupational
Schemes

Savings

Individual
Accounts

Fully Funded &

Regulated

Voluntary
Individual
Ret. A/cs

Importance of Social
Security
Poorest 40% of people over 65 get
82% of their income from Social
Security
Middle 20% get 64% of their income
from SS
Even after SS, more than 20% of
widows over 75 live in poverty
Even after SS, women over 65 never
married have 27% poverty rate

Limitations of Social Security Schemes

Inadequate information and data

Low coverage of old age and poor population
Limited outreach to informal sector
Poor management and implementation of
social welfare schemes
Inefficient regulatory mechanisms
Financial and resource constraints
Lack of coordination among different
departments

SSD

What is SSD?
Monthly benefits to covered disabled
workers, their dependents, and
survivors
Coverage extends to spouses,
widows(ers), dependent children

Prevalent Retirement Benefit Schemes

Prevalent Retirement Benefit Schemes

Three schemes prevalent
Provident Fund
Gratuity
Pensions

Prevalent Retirement Benefit

Schemes
Under the Labor Law (West Pakistan Industrial and
Commercial Establishments Act 1968) provision of
gratuity (30 days basic salary) is a must for
employers
with 50 or more workers unless they have a
provident
fund scheme
No protection for non-workers
No protection where number of workers is less
than 50

Provident Fund
Defined contribution scheme
Contribution as % of salary (5 to
10%) by employee
Accumulated in individual accounts
Investment income credited based
on balance
Investment subject to SECP regulation
(no tax on investment income

Provident Fund
Permanent
withdrawals
allowed
during service for particular purposes
Loans against PF balances allowed
Employer contribution allowed as tax
deductible expense (up to 8.33% of
salary) provided scheme approved by
Income Tax Department

Gratuity

Gratuity
Defined benefit scheme
Lump sum payable on leaving service
(through retirement or otherwise) based on
salary (normally final salary) and period of
service

Scheme
normally
unfunded
although
sometimes funded.
Contribution to fund allowed as tax deductible
expenditure provided fund approved under
Income Tax Rules
Taxable status of benefit dependent on
whether scheme
Unapproved

VPS

VPS
The VPS is an important addition to the pension
framework in Pakistan.
Provides an opportunity for :
Individuals who have no retirement benefits to save
for retirement .
Topping up of retirement benefits provided by
gratuity and provident fund schemes (existing
members of pension schemes excluded)
A simple mechanism for implementing small
occupational schemes although the defined
contribution nature may prevent larger schemes
from using this mechanism
The impact which this will have will largely be based
on a number of factors, including:
Ability to effectively market the scheme
Returns on managed assets achieved over time

VPS Challenges & Impact

The major challenge of the VPS is that of
effective marketing/ distribution
Charge structure will not allow compliant
products to be marketed through a typical life
insurance sales force
Products are more likely to be bought rather
than sold

Impact is likely to be minimal from a social

security viewpoint
Likely to be taken up by affluent individuals
Charge structure again will dictate fairly large
average savings in order for providers to be
able to absorb costs

Pensions

The Pakistan Pension Fund

(PPF)
The Pakistan Pension Fund (PPF), was
launched on 29th June 2007.
PPF is a flexible savings plan which
facilitates all individuals who are Pakistani
nationals
it works to save for their retirement in a
systematic way
the savings with investment returns after
retirement or before retirement in case of
need.

Pension
Normally defined benefit with pension
determined based on salary (normally
final or final average) and period of
service
Pension normally payable from
retirement age lower amount
payable on early retirement other than
due to disability
Provisions for early benefit on death
or invalidity

Pension
Some defined contribution scheme
with
coverage
for
death
and
invalidity
Normally funded
Contributions allowed as deduction
for tax up to 20% provided scheme
is approved as Approved Super
annotation Fund under Income Tax
Rules

Number of Employees Covered by

the Pension Schemes
Organization

total

Total Federal Divisions 11,174

Total Attached
Departments
Total Autonomous
Bodies

281,623

90,304

Banking and Finance

total

National Bank of Pakistan

15,638

Habib Bank Ltd.

22,119

United Bank Ltd.

14,635

National Investment Corporation of

Pakistan

303

Transport and Communication

Pakistan Telecommunication
Company Ltd.

56,763

Industry
Pak-Saudi Fertilisers

1,005

Pak-Arab Fertilisers

1,085

Energy

KESC
Oil and Gas Development
Corporation

Sui Northern Gas Pipeline Ltd.

Sui Southern Gas Company

Total

12,478

9,663

6,987

5,345

Pakistan State Oil

2,702

National refinery Ltd.

1,058

Conclusion
Government/SECP need to focus on
Expanding coverage by introducing social
security legislation to cover the informal
sector including agricultural workers

Introduce
legislation
to
regulate
occupational schemes already in existence
Introduce third party arrangements to
ease the setting up of schemes by smaller
employers
Government also needs to seriously
focus on increasing the institutional

Conclusion
A very long way still to go in making
pensions effective as a form of social
security provision in the country
The VPS, while being an important step in
promoting retirement savings, is not really
expected to contribute towards the social
protection side
Much needs to be done to strengthen the
EOBI scheme and also the occupational
pension framework

Thanks