Key Takeaways
- SECP introduces Passive Equity Sub-Fund under Voluntary Pension Scheme.
- Available from January 1, 2027, offering savers choice between active and passive funds.
- Management fee capped at 0.75% per annum for ETF-based options.
The Securities and Exchange Commission of Pakistan (SECP) has introduced a Passive Equity Sub-Fund as part of the Voluntary Pension Scheme (VPS), effective from January 1, 2027. This move aims to provide pension savers with greater flexibility and choice in managing their retirement savings.
According to a statement from SECP, the new sub-fund will be offered alongside existing equity, debt, and money market sub-funds, allowing pension fund managers to offer both actively managed equity funds and passive equity funds that track a specified market index.
Pension fund managers can manage the Passive Equity Sub-Fund by directly tracking a market index or by investing in Exchange Traded Funds (ETFs). For ETF-based options, managers may invest in equity ETFs listed on the Pakistan Stock Exchange (PSX), providing diversified exposure to the equity market.
The management fee for an ETF-based Passive Equity Sub-Fund will be capped at 0.75% per annum. In cases where a pension fund manager invests in ETFs managed by its own asset management company, no additional management fee will be charged, thus avoiding two layers of management fees on the same investment.
Dr Kabir Ahmed Sidhu, Chairman of SECP, stated, 'The introduction of Passive Equity Sub-Funds will give pension savers greater choice in managing their retirement savings and provide a cost-efficient route to participate in the stock market.' He added, 'This reform will support wider participation in the voluntary pension system and strengthen long-term retirement savings.'
The measure is designed to expand accessible and cost-efficient investment options for long-term retirement savings and to strengthen Pakistan’s voluntary pension system. By offering this new sub-fund, SECP aims to enhance the overall retirement savings framework in the country.
Pension savers will now have the opportunity to choose between actively managed equity funds and passive equity funds that track a specified market index, thereby providing a more cost-effective and diversified investment option for their retirement savings.
The introduction of this new sub-fund is expected to encourage more individuals to participate in the voluntary pension system, thereby contributing to the long-term financial security of pension savers.
The introduction of Passive Equity Sub-Funds will give pension savers greater choice in managing their retirement savings and provide a cost-efficient route to participate in the stock market.
Dr Kabir Ahmed Sidhu, Chairman SECP
