Govt employees recruited after mid-July to be denied pension

KATHMANDU, July 5: As the pension burden on the state has been increasing by billions of rupees every year due to retiring government employees, the government has decided that, starting from mid-July 2025 of the fiscal year 2025/2026, newly appointed civil servants will no longer be entitled to pension and gratuity benefits. Instead, a contribution-based social security system has been implemented.

The Ministry of Finance on Friday issued a circular to all ministries, regulatory bodies, public institutions, boards, committees, and enterprises, instructing them to make necessary arrangements to implement the contribution-based social security system. The circular also clarified that the government will no longer bear any liabilities arising from the failure to implement this system.

Finance Ministry spokesperson Shyam Prasad Bhandari said that once the contribution-based social security system is implemented, employees covered under the scheme will have different modalities for receiving post-retirement benefits—either in monthly installments, as in the current system, or as a lump-sum payment.

Another senior official at the Ministry of Finance stated that once the contribution-based social security system is implemented, the provision allowing a wife to receive a monthly pension after the death of her husband, as in the current system, will be discontinued.

“The number of pension-receiving employees has been increasing every year. In some cases, even after the death of a husband, his wife continues to receive the pension. This provision alone has pushed the state's pension liability to nearly Rs 100 billion annually. That is why the Ministry of Finance was compelled to make this decision,” the official said.

According to him, under the contribution-based social security system, 20 percent of the employee’s salary will be deducted, while the government will contribute an additional 11 percent. The combined amount will be deposited into a fund, which can be invested in various sectors. After retirement, employees will receive benefits from this fund. The official claimed that these benefits could even be higher than those provided under the current system.

This system will not only apply to government employees but also to employees of regulatory agencies like the Insurance Board, Securities Board, public institutions, boards, committees, and enterprises.

Stating that the contributory social security system will now be implemented, the Ministry of Finance on Friday issued a circular to Nepal Rastra Bank, Nepal Insurance Authority, Securities Board of Nepal, all 45 public enterprises, and various boards, committees, and institutions.

The circular mentions that starting from mid-July, the Government of Nepal will implement the “Contribution-based Social Security Act 2017” and the “Retirement Fund Act 2018” for civil servants, workers, and other individuals to ensure social security benefits.

"The circular states that due to the failure of public institutions to make necessary arrangements for post-retirement benefit payments, entities operating at a loss and those relying entirely on government resources—rather than their own—have been creating long-term liabilities for the state treasury.