Voluntary Pension System Pakistan

According to the official website of the Securities & Exchange Commission of Pakistan (SECP), the Voluntary Pension System provides a comprehensive framework for the employed and self-employed individuals to contribute into the Pension Funds launched under this system, during their working life to provide regular income after retirement. This way, an effort is made to enable the participants maintain a reasonable standard of living at retirement. This, therefore, inevitably makes the Pension Funds a savings-cum-investment Vehicle.

According to SECP, Pakistani nationals holding National Tax Number or a Computerized National Identity Card can avail tax credit by investing a part of their salary or income from business as specified in the tax laws. Current tax laws grant EEE status to gratuity and superannuation funds. These schemes are largely “Defined Benefit” schemes, and the pension liabilities are kept as book reserves. Provident fund is contributory scheme and is partially tax exempt if the employer also contributes on behalf of the employees. The employer sponsored retirement schemes work out almost 30% of the income of employees, whereas contribution to VPS is restricted to 20% of individual’s income. In order to bring uniformity in treatment between VPS and employer sponsored schemes, SECP and private pension industry are striving to create a level playing field between the two schemes. We are also working to devise a mechanism for inter-transferability of funds between employer sponsored retirement schemes and VPS with the objective to introduce best practices in respect of all retirement schemes.

According to SECP, individuals contributing to the Pension Fund have the flexibility to choose between various investment options as well as between various fund managers. The REITs, Pensions and Private Equity Wing of the Specialized Companies Division of SECP regulates and monitors the Pension Funds.

The official policy documents concerning VPS can be downloaded from the official website of the SECP.

Tags: SECP, Business, Economics, Trade, Retirement, Islamic Banks

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