SECP Proposes Amendments to Voluntary Pension System Rules

The Securities and Exchange Commission of Pakistan (SECP) has released a Consultation Paper suggesting revisions to the Voluntary Pension System (VPS) Rules of 2005. The goal is to broaden accessibility and improve the effectiveness of Pakistan’s pension system.

Key Proposal

A primary suggestion involves enabling Employer Pension Funds (EPFs) to serve several employers using a shared fund structure. This adjustment would allow pension managers to consolidate contributions from diverse employers, boosting financial efficiency via economies of scale. It also allows Small and Medium-sized Enterprises (SMEs) to provide retirement benefits without needing to establish individual funds.

Background

Despite earlier changes to the VPS Rules in February 2024, some structural constraints continued to impede scalability and wider market acceptance. The then-current structure restricted each fund to one employer, which limited scalability and created cost inefficiencies, especially for smaller employers.

Consequently, SECP launched an impact evaluation to determine how well the VPS Rules addressed the changing landscape of retirement savings. Several areas needing improvement were identified to enhance operational efficiency, broaden pension coverage, and lower entry barriers for employers. The suggested revisions aim to more closely align the regulatory framework with global standards, eliminate ambiguities, and encourage a stronger culture of saving for retirement in Pakistan.

The consultation paper is available for public review and comment for a period of 15 days from its publication date.