The Securities and Exchange Commission of Pakistan (SECP) has introduced a Passive Equity Sub-Fund under the Voluntary Pension Scheme (VPS) framework, which will be offered by pension fund managers from January 1, 2027.
According to a statement, the new sub-fund will be mandatorily offered alongside existing equity, debt and money market sub-funds, giving savers the choice between actively managed equity funds and passive equity funds that track a specified market index.
Pension fund managers may manage the Passive Equity Sub-Fund either by directly tracking a market index or by investing in Exchange Traded Funds (ETFs). Under the ETF-based option, managers may invest in equity ETFs listed on the Pakistan Stock Exchange (PSX), providing diversified exposure to the equity market, SECP said.
The management fee for an ETF-based Passive Equity Sub-Fund will be capped at 0.75% per annum. Where a pension fund manager invests in ETFs managed by its own asset management company, no additional management fee will be charged, avoiding two layers of management fees on the same investment.
“The introduction of Passive Equity Sub-Funds will give pension savers greater choice in managing their retirement savings and provide a cost-efficient route to participate in the stock market,” said Chairman SECP, Dr Kabir Ahmed Sidhu.
“This reform will support wider participation in the voluntary pension system and strengthen long-term retirement savings.”
The measure is aimed at expanding accessible and cost-efficient investment options for long-term retirement savings and strengthening Pakistan’s voluntary pension system.