ISLAMABAD: The private pension fund industry grew by over 32% during FY 2016-2017, and the total assets of the industry crossed Rs25 billion. The growth in the pension industry has primarily resulted from an increase in participation by general investors and better performance of the stock market. Private pension funds have more than 18,000 participants, and nearly 60% of their assets are invested in the equity market.

Investors preferred sharia-compliant pension products over conventional products. Out of Rs25 billion assets of pension funds, over Rs16 rupees comprise of sharia-compliant securities.  

Private pension funds were introduced in 2007, under the 2005 Voluntary Pension System Rules. At present, there are 19 pension funds operating in the market, out of which 10 are Sharia compliant and 9 are conventional. These funds are managed by 10 fund managers, who have vast experience in managing pooled investments. The pension funds provide participants with options to invest in securities and commodities.

Participants can choose allocation policies suiting their risk and return preferences. The fund managers, depending on an asset class, charge fee ranging from 0.5% to 1.5% per annum. Fund managers can also charge sales load up to 3% of the contribution. However, the SECP has issued a directive restraining pension fund managers to charge sales load if investors themselves approach the fund manager for investment. All persons holding CNIC can join pension funds and get tax credit of up to 20% of taxable income. People above 40 years of age can get even higher tax benefits.

Participants can choose retirement age between 60 to 70 years. On retirement, they can withdraw up to 50% of the accumulated balance in lump sum and the remaining 50% in installments, as pension. The periodic performance of the pension funds relating to the last five financial years is as follows:

Islamic Pension Funds