ISLAMABAD, March 4: The Securities and Exchange Commission of Pakistan (SECP) held a capacity building workshop for journalists at its head office, focusing on enhanced scope of Voluntary Pension System (VPS) regulatory framework. The event aimed to raise public awareness and understanding of Voluntary Pension System.
Khalida Habib, Executive Director, Specialized Companies Division explained the participants that the regulatory framework has been amended to allow employers to offer fully funded defined contribution pensions to their employees in a fail-safe environment. This change was made through amendments in the VPS Rules, 2005 and NBFC&NE Regulations, 2008. This allows Group Companies, Holding Companies, Federal Governments, and Provincial Governments to provide comprehensive post-retirement income solutions.
Significant amendments in VPS rules:
1. Evolve and Enhance the scope of Voluntary Pension System (VPS) 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 work force.
2. Introduction of professional management of post-retirement savings of the (employees), both in the public and private sector, by SECP licensed/registered entities with minimum rating of “AM2”.
3. Graduating away from the traditional Pay-As-You-Go Pensions with Defined Benefit structure, which have remained a burden on the Government exchequer, largest employer in the country in terms of funding the pension bill out of current expenditure.
4. Ensuring that pension liabilities in the future are fully funded with benefit of accumulation through regular contributions in order to avoid defaults directly hurting the old-age beneficiaries.
5. Transforming the regulatory framework to steer the overall pension savings paradigm of the country towards global best practices.
6. Aligned the regulatory framework with SECP’s vision to meet the evolving financial needs of modern work force.
7. Amendments in the VPS Rules, 2005 along with corresponding amendments in the NBFC&NE Regulations, 2008 have been notified after a careful assessment of the needs for a vibrant and futuristic pension landscape in Pakistan.
8. Extensive engagements with sector and global experts prior to introducing flexibility for the Employer Based Pensions within the framework of VPS which is the only Defined Contribution Based Pension Platform in Pakistan.
9. Allowing flexibility to the workers/employees to save and grow their investments according to their individual risk profiles and old age income needs.
10. Further strengthen the overall risk framework of VPS to ensure quality of services and investment management, a minimum Asset Manager Rating criterion of ‘AM2’ has been introduced for Asset Management Companies, Life Insurance Companies and newly allowed Investment Advisors who wish to offer Employer Pension Funds under the VPS.
11. Enhanced inclusiveness of the VPS Framework by allowing Non-Resident Pakistanis holding Pakistan Origin Cards to save for retirement in Pakistan and benefit from what is offered to the resident Pakistanis.
12. Bring Pakistan at par with the well-established pension solutions like 401(k) retirement plans in the USA.
13. Revolutionizing but also preserving the inherent spirit of VPS to allow self-employed or informal sector work force to save for their retirement age financial needs while formally including the formal employment sector.