Private pension funds were introduced in 2007 under the 2005 Voluntary Pension System Rules. At present, there are 17 pension funds, out of which 9 are Sharia-compliant and 8 are conventional. They are managed by 9 experienced pension fund managers. They provide participants with options to invest in securities and commodities. Participants can choose allocation policies suiting their risk and return preferences.
All persons holding CNIC are eligible to become members of pension funds and accumulate savings for their retired life. Tax credit of up to 20 percent of taxable income can be availed upon investment in pension funds. Moreover, persons above 40 years of age can get even higher tax benefits.
Participants have the flexibility to choose retirement age between 60 to 70 years. Upon retirement, they can withdraw up to 50 percent of the accumulated balance in lump sum and the remaining 50 percent in instalments, as pension, or 100 percent in installments.
With growing awareness about VPS, interest in private pension funds is on the rise. The assets of private pension funds have shown a noticeable growth.
The total net assets of the pension fund industry are currently over Rs 22 billion contributed by more than 15,000 participants.
The fund managers, depending on the asset class, charge fee ranging from 0.5 percent to 1.5 percent per annum from the pension funds. Further, the fund managers can charge sales load up to 3 percent of the contribution.
However, the SECP has issued a directive restraining pension fund managers to charge sales load if investors themselves approach them for investment.-PR
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