Voluntary Pension Schemes in Pakistan

In: Business and Management

Submitted By swasifh
Words 2258
Pages 10
VOLUNTARY PENSION SCHEME: VIABLE
ALTERNATIVE TO PROVIDENT FUND

After studying the Chilean model, the Securities and Exchange Commission of Pakistan (SECP) last year took the first step towards pension reform by granting licenses to four private sector asset management companies to act as pension fund managers under the recently promulgated Voluntary Pension System Rules. Pension reforms are essential to ensure that the macroeconomic gains of the last few years are passed on to the masses. While there has been an exponential rise in consumer spending, the saving rate has remained alarmingly low. Moreover, due to inflationary pressures, the real value of money is continuously reducing. Cognizant of this fact, the government introduced the Voluntary Pension Scheme (VPS).
Currently both private and public sectors offer occupation savings schemes in the shape of provident funds and gratuity schemes. However, in their truest sense, provident funds and gratuity schemes are not retirement products. Fund withdrawal, job switching and loans against the schemes are a norm. Invariably, individuals are therefore left with depleted savings at the time of retirement. The introduction of VPS, managed by private pension fund managers, will aid mobilisation of savings, which in turn will help individuals become self-reliant in old age, reduce financial liability for government and employers at large and relieve financial obligation for younger generations.
The salient features of VPS are that all Pakistani nationals over 18 years old holding a valid National Tax Number or Computerised National Identity Card may participate. Moreover overseas Pakistanis with a National Identity Card for Overseas Pakistanis may also join the scheme. The individualised pension account is in the name of the investor and customised according to the specific needs and requirements of the investor.…...

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