Pensioners to Get New Investment Option

The Securities and Exchange Commission of Pakistan (SECP) has launched a Passive Equity Sub-Fund as part of the Voluntary Pension Scheme (VPS), enabling retirees to invest in the stock market affordably starting from January 1, 2027. Pension fund administrators will be mandated to offer this new sub-fund alongside the existing equity, debt, and money market sub-funds.

This option grants retirees the flexibility to select between actively managed equity funds and passive funds that mirror a particular market index. Pension fund administrators can administer the new sub-fund by mirroring a market index or investing in exchange-traded funds (ETFs). The ETF-based route permits administrators to invest in equity ETFs traded on the Pakistan Stock Exchange, thereby offering diversified exposure to the equity market.

The management fee for an ETF-based Passive Equity Sub-Fund is capped at 0.75 percent per annum. If a pension fund administrator invests in ETFs managed by its own asset management company, they are exempt from charging an additional management fee, thereby avoiding a dual layer of fees on the same investment. SECP Chairman Dr. Kabir Ahmed Sidhu asserted that the new sub-funds would afford pension savers greater choice in managing their retirement savings and provide a cost-effective means to participate in the stock market.

He emphasized that the reform would foster wider participation in the voluntary pension system and bolster long-term retirement savings.