ISLAMABAD: The securities regulator has amended its voluntary pension system rules to allow employers to offer defined contribution pensions to their workers, it said on Friday.
The Securities and Exchange Commission of Pakistan (SECP) said the move would broaden the scope of the pension system and provide comprehensive post-retirement income solutions to employees in both the public and private sectors.
The SECP notified the amendments in the Voluntary Pension System Rules, 2005, and the Non-Banking Finance Companies and Notified Entities Regulations, 2008, after consulting with stakeholders.
"The SECP, to further broaden the scope of VPS, has amended the regulatory framework by allowing employers, both in the public and private sectors, to offer fully funded defined contribution pensions in a fail-safe environment to their employees," the statement said. "To affect this, necessary amendments in the VPS Rules, 2005, along with corresponding amendments in the NBFC&NE Regulations, 2008, have been notified."
The amendments introduce Employer Pension Funds, which enable group companies, holding companies, federal governments, and provincial governments to set up and manage pension funds for their employees.
The SECP said the amendments aim to create a vibrant, futuristic pension landscape in Pakistan, allowing the public to manage post-retirement savings professionally and grow their investments according to their individual risk profiles and income needs.
The regulator also introduced a minimum asset manager rating criterion of 'AM2' for eligible entities, such as asset management companies, life insurance companies, and investment advisors, who wish to offer employer pension funds under the voluntary pension system.
"This would strengthen their risk management and ensure quality of services", the SECP said, adding that it would also enable licensed investment advisors to participate in the pension savings value chain by providing employer pension funds.
The SECP said the upgradation of the regulatory framework for the voluntary pension system has brought Pakistan on par with pension solutions like 401(k) retirement plans in the United States, allowing self-employed and informal sector workers to save for retirement as well as enabling the formal employment sector to offer efficient pension solutions.