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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) is amending the Voluntary Pension System Rules to facilitate growth of the pension industry and to protect participants’ interests.
The amendments offer the participants a choice to shift their accumulated balance from one pension fund to another once in a year instead of waiting for the anniversary date.
Also it has proposed reduction in the notice period for the change of fund or fund manager from 30 days to 21 days.
The VPS Rules were notified in 2005 by the SECP to provide a framework for building pensions by salaried as well as self-employed people, after that the private pension funds were launched in June 2007, which have now grown to nine funds with more than Rs1.5 billion worth of assets.
“The amendments are in line with the needs of masses and government policies for taking fiscal measures to foster long-term savings and to encourage people to save for their old age,” said an official of the SECP.
The official said that the recent changes to the tax law allow an individual to invest up to 20 per cent of taxable income in pension fund and withdraw up to 50 per cent of his/her accumulated balance as cash at the time of retirement.
“These amendments are being made by SECP to align the provisions of VPS Rules and the tax law,” the official said.
The proposed amendments would also specify the method for valuation of debt securities so that the participants get a fair view about their accumulated wealth in a pension fund.
The amendments have also laid guidelines about contents of offering document of a pension fund, which would facilitate the fund managers to prepare the document with appropriate disclosures.
The new VPS Rules would also oblige trustee of a pension fund to play an active role and with a vigil on the trading behaviour of a fund.
After the amendments, the pension fund managers will also have the same timeline for submission of annual reports as allowed to companies under the Companies Ordinance. The amendments also envisage involvement of pension fund managers in determining performance benchmark for the pension fund industry.
The labour law permits employers to offer VPS as an alternative to a provident or gratuity scheme. However, the current tax law does not allow tax neutral transfer of balances accumulated in a provident fund or a gratuity scheme to a pension fund.
There is a growing demand that the accumulated balances may also be allowed to be transferred to VPS without additional tax impact, in order to accommodate this demand, in future, enabling provisions have been made in the rules through these amendments, which will become effective when relevant tax provisions are amended by the government.
The draft amendments have been placed on SECP website for feedback from the stakeholders within 14 days.
