Where investing in pension schemes has the most pivotal advantage of helping you secure your and your dependants' future, there is another that normally skips the eye - Tax Benefits. Voluntary Pension Schemes (VPS) are customised pension planning investment vehicles regulated by the Securities & Exchange Commission of Pakistan and offered by selected Asset Management Companies.
"Given the current economic scenario, it is very important that every person starts saving for their retirement from an early age", says Mir Muhammad Ali (CFA) CEO of UBL Fund Managers. "The sooner you start, the more time for your savings will have to grow". UBL Fund Managers is amongst the leading Asset Management Companies in Pakistan that is licensed by the SECP to offer VPS to clients.
In addition to helping individuals plan for their retirement, these schemes also offer unique tax benefits that are not available with traditional investment schemes. One of these benefits is called the 'Tax Credit'. A tax credit is a discount or refund that one can claim on their Income Tax when they invest in a pension scheme. The amount of tax credit that an individual can claim depends on his or her annual income, annual tax rate, the amount of investment made and the current age of the investor.
For example, a person who is over 55 years of age can claim a tax credit up to 50 percent of his annual tax bill - thus reducing his income tax deductions by half. Those who are in their early 40's can reduce their tax bill by up to 20 percent. The tax-efficient design of Voluntary Pension Schemes makes them an attractive investment vehicle for anyone who wants to invest for their future. In addition to receiving a tax credit, "VPS also offer tax exemption at the time of withdrawal", adds Ali. One can withdraw 50 percent of their retirement savings from a pension scheme without any tax deduction. On the other hand, if you were to keep this money in a saving scheme offered by a bank, a 10 percent withholding tax would be deducted.-PR