Treasury Board president Tony Clement said the proactive disclosure reports are a step towards more transparency.
Government departments are already required to report contracts over $10,000.
Under the changes, departments will have to internally flag those contracts within their own financial and contracting systems if they are given to retired public servants receiving a pension, and publicly disclose that the contract was awarded to a retired pensioner.
Clement said while some former public servants have valuable experience that departments might need, he wants to curb a practice perceived as "double-dipping" unless it is necessary.
'This should not be the norm' Clement says
"Canadians want to know that public servants who are already receiving a pension have an unusual expertise that justifies this unusual situation, so this should not be the norm," said Clement.
"One of the ways one controls how many times this does occur is by being transparent about it and being accountable for it and publishing proactively when it does occur," he said.
Many of the contracts federal departments already disclose are to companies, however, and not individuals.
Clement said when it's the case that the "driving mind" behind the company is a former public servant receiving a pension, that would be noted in the disclosure of the contract.
Consultants, union, doubt move will curb contracts
One consultant told CBC News he gets government work because he knows the corporate history and how to get the job done. He said that's important at a time when so many people are being laid off. Consultants CBC spoke with say they are sceptical the change will curb the hiring practice.
Gary Corbett, the president of the Professional Institute of the Public Service, said the new rules are "meaningless" and are more for appearances.
"It's going to make the public angry. Look at these fat cat people who collect a pension," said Corbett.
Corbett said the new rule does nothing to address the government's ever-growing use of high-priced consultants in departments such as National Defence and Public Works.
"They're already overburdened with consultants, DND is laden with consultants, PWGSC there is five or six members sitting next to ever two of my members, they are just using contractors up the wazoo," said Corbett.
The measures will take effect on January 1st, 2013.