The cost of living in Pakistan has increased significantly as compared to the early 2000s. Inflation had been on the rise until it faced a slight dip in 2025. Even with the rise in job opportunities due to growing e-commerce and technological advancement, the decrease in the purchasing power of the rupee has made it difficult for people to have a secure source of income once they reach the age of retirement. Economic volatility further creates a lot of problems if a person has not done proper retirement planning.
Why people are not inclined towards retirement planning becomes a prime question for anyone exploring the topic of retirement planning. According to a Dawn report, around 65 million Pakistani workers are not registered in any pension scheme at all and face a demeaning and despondent old age with zero pension.
There could be multiple reasons for people not opting for retirement savings. Primarily, cultural norms are a hindrance in the way of retirement planning. For instance, cultural and societal reliance on family support is preferred over personal savings.
Moreover, there seems to be a general mistrust in non-Islamic financial institutions and investment products, which keeps people from investing for their future consumption. Furthermore, there is a lack of financial literacy and awareness about retirement products among the masses. According to the Global Financial Literacy Survey Report, financial literacy in Pakistan is close to somewhere around 26 per cent. The lack of financial planning due to the aforementioned reasons puts people at great risk when they reach old age.
As life expectancy steadily rises and traditional family support systems weaken, there is greater urgency for retirement planning to become mainstream
Undoubtedly, Pakistan has a large middle class; therefore, there is also an issue of most people having low and unstable incomes, making savings a lesser priority. Given the rising medical costs due to better healthcare equipment and technological advancement, there is a chance that people would suffer from a lack of healthcare affordability.
In addition to this, there are inadequate government-backed pension systems for private sector employees. The Employees’ Old-Age Benefits Institution (EOBI) remains ineffective due to bureaucratic hurdles. The recent scandal regarding EOBI corruption is one such example of an inefficient institution. Recently, the Public Accounts Committee (PAC) was apprised that EOBI incorrectly distributed Rs2.79 billion in Old Age Benefit Pensions to 5,131 individuals by altering their recorded ages. This shows the ineffectiveness of the only public retirement fund that exists in the country. All this combines to put people at risk of working into old age due to lack of funds.
As Pakistan’s life expectancy steadily rises and traditional family support systems weaken, there is great urgency for retirement planning to become mainstream. Inflation is continuing to erode the purchasing power of money, which means today’s savings may fall short tomorrow. Thus, relying solely on family support or government welfare introduces the risk of a financially insecure old age. In contrast, retirement planning offers individuals the opportunity to maintain dignity and financial independence even in later years.
The dangers of not engaging in retirement planning are not only limited to individuals, but they extend to the economy as well. Lack of retirement planning puts an increased burden on government welfare programmes and social security. A stronger culture of saving and investment will also strengthen the broader economy. It will ensure more stable domestic capital for growth rather than dependence on foreign loans. Clearly, there are several benefits of retirement planning that Pakistanis need to tap into.
Having established the case for why retirement planning is necessary, it is also important to explore the options people have for retirement planning. To facilitate retirement planning, Pakistan has the Voluntary Pension Schemes (VPS) programme. It is a flexible and a privately managed solution for retirement planning which is available to both salaried and self-employed individuals.
VPS are regulated by the Securities and Exchange Commission of Pakistan and managed by leading asset management companies. These schemes allow participants to make contributions at their own pace in a way that doesn’t burden them financially in the present either. VPS also offer crucial tax incentives under Section 63 of the Income Tax Ordinance. Contributions are deductible from the taxable income of a person and provide the returns on investments that grow tax-free until withdrawals are made.
Certainly, retirement planning is not a luxury but a necessity in today’s Pakistan. It is time to move beyond outdated assumptions of familial support and face the economic realities of ageing. By embracing structured saving avenues like VPS, individuals can secure not just their own futures but contribute to a more stable and self-reliant economy. It is an investment not only in personal well-being but in the nation’s financial resilience.
Areej Wasi is an Islamic finance researcher, and Mohammad Ibrahim Abro is a lawyer.
Published in Dawn, The Business and Finance Weekly, June 2nd, 2025
