SECP adjusts VPS framework to enhance retirement options

Jamate Islami
Jamaty Islami

The Securities and Exchange Commission of Pakistan (SECP) has revised the regulatory framework governing the Voluntary Pension System (VPS) to expand its reach.

This includes allowing employers from both public and private sectors to provide fully funded defined contribution pensions within a secure environment to their employees.

To implement these changes, amendments have been made to the VPS Rules of 2005, alongside corresponding adjustments to the NBFC&NE Regulations of 2008.

The introduction of employer pension funds now permits various entities such as group companies, holding companies, and federal and provincial governments to offer comprehensive post-retirement income solutions to their employees.

These amendments are designed to establish a dynamic, forward-looking pension environment in Pakistan. They empower individuals to professionally manage their post-retirement savings, allowing their investments to grow in line with their risk tolerance and financial needs.

Moreover, eligible entities like asset management companies, life insurance companies, and investment advisors, intending to provide employer pension funds under VPS, are now required to meet a minimum asset manager rating criterion of ‘AM2’. This criterion aims to enhance risk management practices and ensure the delivery of high-quality services.

This update enables licensed investment advisors to play a role in the pension savings process by offering employer pension funds.

The enhancement of the regulatory framework for VPS aligns Pakistan with pension solutions such as 401(k) retirement plans in the USA. This move not only facilitates self-employed and informal sector workers in saving for retirement but also enables the formal employment sector to provide efficient pension solutions.

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