The total net assets of the voluntary pension fund industry are currently over Rs 23 billion, contributed by more than 19,000 participants. The fund managers, depending on the asset class, charge the pension funds fees ranging from 0.5% to 1.5% per annum.
Further, the fund managers can charge sales load of up to 3% upon contribution. However, the SECP has issued a directive restraining pension fund managers from charging sales load of 1.5% of the contribution if an investor carries out a transaction online or through the website.
Investors preferred Sharia-compliant pension products over conventional products. Out of Rs 23 billion pension funds assets, over 15 billion rupees are invested in Sharia-compliant pension funds.
Private pension funds were introduced in 2007 under the Voluntary Pension System Rules, 2005. At present, there are 19 pension funds operating in the market, out of which 10 are Sharia-compliant and nine are conventional. These funds are managed by ten pension fund managers who have vast experience of managing pooled investments. The pension funds provide participants with options to invest in securities and commodities. Participants can choose allocation policies suiting their risk and return preferences.
All persons holding a CNIC are eligible to become members of pension funds and accumulate savings for their retired life. Tax credit of up to 20% of taxable income is also available. Moreover, persons above 40 years of age can avail even higher tax benefits.
Participants have the flexibility to choose retirement age of 60 and 70 years. Upon retirement, they can withdraw up to 50% of the accumulated balance in lump sum and the remaining 50% in installments, as pension.