The growth in the pension industry is mainly due to increased inflows from general investors and better stock market performance, the country’s regulator said.
The private pension funds have more than 18,000 participants, and nearly 60% of their assets are invested in equity markets.
Islamic dominance
Islamic funds got the lion’s share of the market, with investors preferring Sharia-compliant pension products over conventional products.
Of the PKR25bn invested in pension funds, over PKR16bn (64%) is funnelled into Sharia-compliant securities.
“At present, there are 19 pension funds operating in the market, out of which 10 are Sharia compliant and nine are conventional,” SECP noted.
Sales load ban
On these products, fund managers charge fees ranging from 0.5% to 1.5% per annum, depending on the asset class.
They can also charge a maximum of 3% commission or ‘load’ on the sale of mutual fund units.
However, the SECP reminded investors that it has issued a directive preventing pension fund managers from charging commission if investors themselves approach the fund manager for investment.
10 years in the making
Private pension funds were first introduced in Pakistan in 2007, under the 2005 Voluntary Pension System Rules.
All persons holding a Pakistani national identity card can join pension funds and get a tax credit of up to 20% of taxable income. People over the age of 40 can get higher tax benefits.
Participants can choose to retire between 60 and 70 years, at which time they can withdraw up to 50% of the accumulated balance in a lump sum and the remaining 50% in pension instalments.
