Nepal’s Pension Expenditure Triples in a Decade

Nepal’s annual pension expenditure has more than tripled over the past decade, raising concerns about the government’s ability to sustain the growing financial burden in the long term.

According to the Pension Management Office, the government spent Rs 26.92 billion on pensions in fiscal year (FY) 2015/16, compared to over Rs 80.83 billion in FY 2024/25.

Stakeholders have long warned that the sharp rise in spending on salaries, allowances, pensions, and social security could overwhelm state finances. In response, the government introduced a contribution-based pension system seven years ago, replacing the previous fully state-funded model.

The Federal Civil Service Act, currently under consideration in Parliament, also proposes increasing the retirement age for civil servants from 58 to 60 years. While life expectancy in Nepal has steadily risen, the pension age has remained unchanged for decades, forcing the government to allocate substantial resources to retired personnel.

Read: Government Struggling to Manage Pension Fund

Finance Ministry officials said all new recruits in government bodies, public institutions, and other agencies as of this fiscal year will be enrolled in the Social Security Fund (SSF) for pensions. The SSF will manage the contribution-based system, aiming to reduce future pension liabilities.

Finance Ministry Spokesperson Shyam Prasad Bhandari said many institutions are already financially weak, yet their pension obligations continue to grow. “By bringing all government agencies, institutions, and committees under the contribution-based pension system, we expect to ease the financial pressure from new hires,” he said.

Pension Management Office chief Bishnu Prasad Kharel said pensions for the army, police, teachers, and other civil servants totaled about Rs 81 billion last year — roughly 5% of the national budget. He attributed the current pressure to decisions made two decades ago to create unnecessary agencies and posts. “If pensions remain non-contributory, they will become unmanageable in the future,” he warned.

Globally, many developed countries have moved to reduce pension costs. In France, a new law passed two years ago raised the retirement age from 62 to 64, to be fully implemented by 2030. The law also requires a minimum of 43 years of work to receive a full pension, despite widespread protests at the time. Several European countries have also increased retirement ages, many setting them above 64 and planning further hikes by 2030, citing rising life expectancy.