The Securities and Exchange Commission of Pakistan (SECP) has carried out performance review of conventional and Shariah-compliant pension funds set up under the Voluntary Pension System Rules for the 6 months from July 1 to December 31, 2010. According to the details released by the SECP here on Wednesday, five pension fund managers are managing nine pension funds out of which five are Shariah-compliant while four are conventional pension funds.
The Voluntary Pension System Rules provide a framework of savings for retirement benefits. People holding Computerised National Identity Card/National Identity Card for Overseas Pakistanis or a National Tax Number (NTN) can become participants to the system on attaining the age of 18 years. A participant of the fund can opt for retirement between the ages of 60 and 70.
For each individual enrolled in the system, a separate account is created representing his/her share in a pension fund. The contributions made by an individual during his or her working life are invested in a combination of equity, debt and money market securities as per allocation scheme selected by the participant. The SECP said that an individual can open more than one pension account with a different pension fund managers.
At retirement age contributions to the pension account are stopped and the participant starts drawing pension from his accumulated fund. Voluntary Pension System (VPS) also allows participants to quit before attaining the retirement age but in that event they have to forego tax benefits already availed.
The current tax law offers some incentives for contribution to VPS. However, the law governing occupational and voluntary retirement schemes, requires review to bring uniformity in the tax treatment made available to different retirement schemes.
So far, five companies have obtained licence from the Securities and Exchange Commission of Pakistan (SECP) to operate as pension fund managers. These companies are managing nine pension funds, of which five are Shariah-compliant while four are conventional. The funds are structured as trusts wherein custody of assets is with a trustee company and investment decisions rest with the fund manager. The results of investment in equity market are more volatile compared to debt and money markets. This behaviour can be observed from the relevant information of the SECP, it added.
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