Key Takeaways
- The Securities and Exchange Commission of Pakistan (SECP) has introduced a Passive Equity Sub-Fund under the Voluntary Pension Scheme (VPS).
- This new option will be available from January 1, 2027, allowing pensioners to invest in the stock market.
- The management fee for ETF-based Passive Equity Sub-Funds will be capped at 0.75 percent per year.
The Securities and Exchange Commission of Pakistan (SECP) has announced the introduction of a Passive Equity Sub-Fund under the Voluntary Pension Scheme (VPS), providing pensioners with a new investment option. This move is set to take effect from January 1, 2027, offering savers a low-cost way to participate in the stock market.
Pension fund managers will be required to offer the new sub-fund alongside existing Equity, Debt, and Money Market Sub-Funds. This will give pensioners the choice between actively managed equity funds and passive funds that track a specified market index.
The new sub-fund can be managed by tracking a market index directly or by investing in exchange-traded funds (ETFs). Under the ETF-based option, managers can invest in equity ETFs listed on the Pakistan Stock Exchange, providing diversified exposure to the equity market.
Dr. Kabir Ahmed Sidhu, SECP Chairman, stated that the new sub-funds would give pension savers more choice in managing their retirement savings and provide a cost-efficient way to participate in the stock market. He emphasized that the reform would support wider participation in the voluntary pension system and strengthen long-term retirement savings.
The management fee for an ETF-based Passive Equity Sub-Fund will be capped at 0.75 percent per year. Importantly, if a pension fund manager invests in ETFs managed by its own asset management company, it cannot charge an additional management fee, thus avoiding two layers of fees on the same investment.
According to the SECP, this reform aims to enhance the accessibility and affordability of investment options for pensioners, making it easier for them to manage their retirement savings. The new sub-fund is expected to attract more participants to the voluntary pension system, thereby contributing to the long-term financial security of pensioners.
The introduction of this new investment option is part of the broader efforts by the SECP to modernize and improve the voluntary pension scheme in Pakistan. The SECP has stated that the new sub-fund will provide pension savers with a more flexible and cost-effective way to invest in the stock market.
