A retirement plan should answer four practical questions:
If you do not calculate your retirement needs, your plan may lack a clear objective. Instead, you could end up with a mix of provident funds, property, bank deposits, and random investments that do not provide the direction you need.
Inflation increases the cost of food, housing, healthcare, utilities, transport, and household support.
Pakistan’s year-on-year CPI inflation was 11.1% in June 2026. Retirement planning should not assume that today’s monthly expenses will remain unchanged.
For long-term planning, it’s important to use a realistic inflation rate and update it from time to time.
Start with current monthly household expenses, but remove costs that may not continue after retirement and add costs that may increase.
Include:
Review separately:
Some of these may end before retirement. Healthcare and family-support costs may increase.
Use the following formula:
Future monthly expense = Current monthly expense × (1 + inflation rate)ⁿ
Where n is the number of years until retirement.
Illustration
Assume:
Estimated monthly expense at retirement:
PKR 200,000 × (1.08)¹⁵ = approximately PKR 634,000 per month
This is an illustration to explain the point, not a forecast. Actual inflation may be higher or lower.
The key point is that if your household spends PKR 200,000 a month now, you shouldn’t plan for retirement using the same amount for your future monthly needs.
A commonly used planning approach is to estimate annual retirement expenses and divide them by a sustainable withdrawal percentage.
Using the previous illustration:
Estimated retirement fund:
PKR 7.61 million ÷ 4% = approximately PKR 190 million
This calculation is intentionally cautious and simplified.
The actual required amount will depend on:
The amount you need for retirement will depend on whether you expect to have steady income sources during retirement, such as rental income, a pension from your employer, or other reliable payments. If you have additional income coming in, your required retirement fund may be smaller. If you do not have these steady income sources, you may need to build a larger retirement fund to cover your expenses.
List only assets that can genuinely support retirement.
Retirement assets may include:
Business interests that can generate income consistently and do not require your daily involvement may be counted as retirement assets. Examples include a share in a business from which you receive regular, reliable profits or dividends without having to manage the operations day-to-day. However, if the business cannot operate without your active participation, or if it is not structured to continue generating passive income during retirement, it should not be included as a retirement asset. Carefully assess whether your business holdings will realistically provide income in retirement before including them in your calculation.
Exclude:
Subtract the projected value of retirement assets from the estimated retirement requirement.
The remaining amount is the retirement funding gap.
Suppose an investor wants to accumulate PKR 50 million over 15 years. Assuming an illustrative annual return of 10%, compounded monthly, the required investment would be approximately:
PKR 121,000 per month
This figure is not guaranteed. Actual contributions may need to be higher if:
That’s why you should review your monthly contribution every year.
Consider three individuals who want to accumulate the same retirement amount:
Person A has more years to contribute and more time for their money to grow. Person C, starting later, has to invest much more each month because there’s less time for growth.
You don’t have to start with a big amount. Instead, you should:
The Securities and Exchange Commission of Pakistan describes the Voluntary Pension System as a self-contributory, tax-advantaged pension arrangement available to adult Pakistanis holding CNICs. The system offers conventional and Shariah-compliant pension funds managed under the SECP’s regulatory framework.
Pakistan’s voluntary pension industry had approximately PKR 138 billion in assets under management as of 31 March 2026, according to the Pakistan Economic Survey 2025–26.
A pension-fund contribution is generally allocated among sub-funds such as:
How you divide your pension fund should depend on your age, how long until you retire, and how much risk you’re comfortable with.
Under Section 63 of the Income Tax Ordinance, as amended up to 20 February 2026, an eligible person contributing to an approved pension fund may qualify for a tax credit. The eligible contribution for calculation purposes is generally limited to the lower of:
Tax laws may change through subsequent Finance Acts, rules, or notifications. The exact benefit depends on taxable income and individual circumstances. Investors should obtain confirmation from a qualified tax adviser before claiming any credit.
A retirement strategy may include:
The right mix of investments will be different for everyone.
For example, if you’re younger, you might invest more in growth assets. If you’re nearing retirement, you may want to shift some of your portfolio to income and safer investments.
Priority:
Priority:
Priority:
A practical retirement plan should establish three separate reserves.
Emergency Reserve Hold approximately six to 12 months of essential retirement expenses in accessible instruments.
Income Reserve Hold several years of planned withdrawals in lower-volatility income, money-market, or government-backed instruments.
Growth Reserve Maintain a controlled allocation to growth assets to help protect purchasing power over a potentially long retirement.
If you keep all your retirement money in cash, inflation can eat away at its value. If you put it all in stocks, you might face big ups and downs in the short term.
Avoid:
Update the retirement plan every year using:
A retirement plan should produce a clear written answer to the following:
Munaafa Investments can help you figure out how much you’ll need for retirement, review your pension and investments, choose the right mix of conventional or Shariah-compliant options, and set up a regular monthly contribution plan.
The calculations in this article are illustrations only. They do not represent guaranteed returns, fixed inflation, or personalised financial advice. Tax treatment should be confirmed under the laws applicable at the time of investment and filing.
Munaafa Insights — Munaafa Investments Email: info@munaafa.com.pk | Website: munaafa.com.pk
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Whether you are planning for long-term wealth creation, retirement, portfolio management, or financial planning, Munaafa Investments is here to help you make informed financial decisions with confidence.
