SECP proposes 'Awami Pension Scheme'

The Securities and Exchange Commission of Pakistan's (SECP) proposed Awami Pension Scheme would make all Pakistani citizens aged between 18-60 years eligible to participate, except those who are covered under any other retirement scheme. Sources told Business Recorder here on Tuesday that Awami Pension Scheme was discussed in the fifth meeting of the National Financial Inclusion Strategy (NFIS) Steering Committee.
It has been decided that the team of State Bank of Pakistan (SBP) will meet SECP and Technical Committee to firm up the proposals on Awami Pension Scheme/Digitization of Pension Payments in coordination with Finance Division before presenting the same to the NFIS Council. It is proposed to launch 'Awami Pension Scheme' which will have the following key features: All Pakistani citizens, aged between 18-60 years, will be eligible to participate in the scheme, except those who are covered under any other retirement scheme.
The scheme will be operated under the existing Voluntary Pension System (VPS) structure and governed under the Voluntary Pension System Rules, 2005. Participants can contribute up to Rs 20,000 per year initially and the government will contribute 10 percent. Monthly pension will start from 60 years of age onwards.
Withdrawal of the government contribution and profit thereon shall not be permitted before retirement. Pension amount will be credited directly into participant's bank account. Trustee will maintain custody and safekeeping of all assets under the retirement scheme.
During the last meeting of NFIS Steering Committee, sources said that executive director SECP informed that Technical Committee on Pension performed a diagnostic study of various retirement benefits which are acting as barriers to financial inclusion with respect to pension, occupational savings schemes and superannuation schemes. While highlighting the brief background of proposed actions with reference to decision of previous NFIS Steering Committee and NFIS Council meetings, he briefed that actions pertaining to financial inclusion are being presented for consideration of the committee ie proposal on Awami Pension Scheme and digitization of pension payments.
The CEO NAFA, while sharing the background of the scheme, briefed that people working in the informal sector presently have minimal knowledge and incentive to save towards their retirement. These people are hardly part of the financial system of the country. Moreover, savings and investment rates in the country are currently among the lowest (around 9 percent) in the world. By providing some incentive, the government can encourage a vast population of the country to become part of the formal financial system.
The official of Punjab Pension Fund, government of Punjab, provided an overview of pension disbursement and apprised the committee that federal and provincial governments have already achieved 64% pension digitization until April, 2017. Remaining could be achieved by the end of FY 2017-18 provided coordinated efforts are made by all stakeholders. He, while highlighting the challenges for digitization of pension, shared the following suggestions of the Technical Committee on Pension:
Proof of life of pensioners through biometric verisys (system) of their thumb impression needs to be developed by Controller General of Accounts (CGA) and implemented by AGPR and provincial stakeholders. The SBP may advise banks to generate SMS alerts to pensioners upon credit of monthly pension into their bank accounts.
The CGA may issue a digitized pension card which could be used for pension withdrawal at ATMs, POS and BB service providers. The federal government needs to amend FTR 341A to enable credit of monthly pension into digital accounts of BB service providers. Web-based online submission and processing of pension for superannuating, retiring, invalid and family pensioners.
The CGA & Finance Division and government of Pakistan will collaborate with SBP for availability of interoperability switch (like M-Net and 1-Link for ATM withdrawal) for cash withdrawal from scheduled banks and digital accounts by pensioners at POS of BB service providers.
The chairman of the meeting lauded the efforts of the SECP team and appreciated the performance towards digitization of pension payments. While commenting on the structure of Awami Pension Scheme, the chairman advised SECP team to put time limit for government contribution up to 03 years instead of indefinite period for every new customer. The chairman also suggested merging the proposals of Awami Pension Scheme and Digitization of Pension Payments as the later will augment the implementation of the scheme.