SECP allows fully funded pension schemes in VPS framework

March 02, 2024 (MLN): The Securities and Exchange Commission of Pakistan (SECP), to further broaden the scope of Voluntary Pension System (VPS), has amended the regulatory framework by allowing employers, both in the public and private sectors, to offer fully funded defined contribution pensions in a fail-safe environment to their employees.

To affect this, necessary amendments in the VPS Rules, 2005, along with corresponding amendments in the NBFC&NE Regulations, 2008, have been notified.

The introduction of Employer Pension Funds enables Group Companies, Holding Companies, Federal Governments, and Provincial Governments to provide comprehensive post-retirement income solutions to their employees.

The amendments aim to create a vibrant, futuristic pension landscape in Pakistan, allowing the public to manage post-retirement savings professionally and grow their investments according to their individual risk profiles and income needs.

In addition, for the eligible entities, i.e., asset management companies, life insurance companies, and investment advisors, who wish to offer employer pension funds under the VPS, a minimum asset manager rating criterion of 'AM2' has been introduced for eligible entities to strengthen their risk management and ensure quality of services.

This enables licensed investment advisors to participate in the pension savings value chain by providing employer pension funds.

The upgradation of the regulatory framework for VPS has brought Pakistan on par with pension solutions like 401(k) retirement plans in the USA, allowing self-employed and informal sector workers to save for retirement as well as enabling the formal employment sector to offer efficient pension solutions.

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