SECP introduces passive equity sub-fund under voluntary pension scheme

ISLAMABAD, Oct 7 (APP): The Securities and Exchange Commission of Pakistan (SECP) has introduced a Passive Equity Sub-Fund under the Voluntary Pension Scheme (VPS) framework, offering pension savers a simple and low-cost option to invest in the stock market from January 1, 2027.

The new sub-fund would be mandatorily offered alongside the existing Equity, Debt and Money Market Sub-Funds, giving savers a choice between actively managed equity funds and passive equity funds that track a specified market index, a news release said on Wednesday.

Under the new framework, pension fund managers may manage the Passive Equity Sub-Fund either by directly tracking a market index or by investing in Exchange Traded Funds (ETFs).

Under the ETF-based option, managers may invest in equity ETFs listed on the Pakistan Stock Exchange (PSX), providing diversified exposure to the equity market.

The management fee for an ETF-based Passive Equity Sub-Fund will be capped at 0.75 per cent per annum. Where a pension fund manager invests in ETFs managed by its own asset management company, no additional management fee will be charged, thereby avoiding two layers of management fees on the same investment.

SECP Chairman Dr Kabir Ahmed Sidhu said the introduction of Passive Equity Sub-Funds would give pension savers greater choice in managing their retirement savings and provide a cost-efficient route to participate in the stock market.

“The introduction of Passive Equity Sub-Funds will give pension savers greater choice in managing their retirement savings and provide a cost-efficient route to participate in the stock market. This reform will support wider participation in the voluntary pension system and strengthen long-term retirement savings,” he said.

The initiative is aimed at expanding accessible and cost-efficient investment options for long-term retirement savings and strengthening Pakistan’s voluntary pension system.