Pakistanis are saving more for retirement ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) released on Thursday the performance report of private pension funds that shows an increase in the post-retirement savings by individuals.
Private pension funds were introduced in 2007 under the Voluntary Pension System Rules 2005. Currently, there are more Sharia-compliant pension funds than conventional pension funds.
There are 17 pension funds out of which nine are Sharia-compliant. These are managed by nine pension fund managers having extensive experience in managing pooled investments.
The assets of private pension funds have shown noticeable growth since these funds were set up. Total net assets of the pension fund industry are currently over Rs18 billion, contributed by more than 10,000 participants. In contrast, total net assets amounted to approximately Rs13bn in 2015, contributed by around 7,000 participants.
Participants of a pension fund have the flexibility to choose their retirement age between 60 and 70 years.
At retirement, they can withdraw up to 50 per cent of the accumulated balance in lump sum and the remaining 50pc in instalments as a pension. Fund managers, depending on the asset class, charge a fee ranging from 0.5pc to 1.5pc per annum.
These funds provide participants with options to invest in equity, debt, money market and commodities. Participants can also choose allocation policy depending on their risk appetite and return preferences.
Tax credit of up to 20pc of taxable income is available on the investment in pension funds. Moreover, persons above 40 years of age can avail even higher tax benefits under the Income Tax Ordinance, 2001.
Meanwhile, the SECP has directed all asset management companies (AMCs) to provide individual unit holders with the right to obtain a refund of their first-time investment — also known as the cooling-off right — in an open-end collective investment scheme.
The refund may be obtained within three business days commencing from the date the investment report was issued to the unit holder (cooling-off period).
The requirements stipulate that the cooling-off right, cooling-off period and the procedure to exercise such rights will be adequately disclosed in the investment form signed by the unit holder at the time of the purchase of units.
Furthermore, the refund for every unit held by the unit holder will be an amount equal to the net asset value per unit applicable on the date the cooling-off right is exercised along with any sales load paid by the unit holder.
The SECP has also said the refund has to be paid within six business days of the receipt of the written request from the unit holder.