The Securities and Exchange Commission of Pakistan (SECP) has introduced details of the agreements to be signed between the employers’ pension fund and pension fund managers to give maximum benefits to the employees on retirement through offering documents.
The SECP has issued S.R.O. 936 (I)/2022 to amend the Non-Banking Finance Companies and Notified Entities Regulations, 2008.
Under the revised regulations, in the case of the employer pension fund, the total expense ratio shall be as per the agreement between the employer and pension fund manager and shall be disclosed in the offering document.
The minimum contents of the agreements between the employers and pension fund managers included the following :
- Name of the parties
- Introduction of the Pension Fund
- Seed capital to be invested/arranged
- Eligibility of employees to participate in the fund
- Contribution procedures; Redemption procedures
- Benefits on retirements
- Names / Designations of employer personnel/employer committee/employee representatives for liaising with the pension fund manager
- Rights of employer/employer committee/employee representatives to change Pension Fund Manager
- Events that may trigger a change of pension fund manager
- Modes of communication of instructions from the employer
- Frequency and mode of notification of net asset value of the units of each sub-fund to employers/employees/employer committee/employee representatives
- Performance measurement mechanism
- Investment parameters
- Allocation schemes
- Remuneration of the pension fund manager and confidentiality
Any other terms and conditions the employers/employees/employee representatives/employer committee and the pension fund manager may include subject to the Companies Ordinance, 1984, the Companies Act, 2017, the Voluntary Pension System Rules, 2005, the Non-Banking Finance Companies and Notified Entities Regulations, 2008, circulars, guidelines and directives issued from time to time under the VPS Rules and any other law applicable in this regard, SECP added.
A Pension Fund Manager shall disclose in the Offering Document the maximum rate of management fee chargeable to the pension fund within the allowed expense ratio limit and shall also be entitled to an accrued remuneration that has been verified by the trustee and paid in arrears every month. “Provided further that there shall be no sales load payable on employer pension funds.
The Actuarial Valuation Report in the case of Pension Annuity Fund contains at least the following information, namely: The basis on which actuarial data has been computed; actuarial methodology; mortality rates used as prescribed by the Pakistan Society of Actuaries, and morbidity rates used which are be justified by the actuary.
The valuation rates of interest used by the actuary, which rate shall be subject to review by the Pakistan Society of Actuaries from time to time and any other parameters that are taken into account, SECP added.