Key Points
- Funds will be available from January 1, 2027
- Managers can track an index directly or invest through PSX-listed ETFs
- ETF-based option will carry a maximum annual management fee of 0.75 per cent
ISLAMABAD: Pakistan’s Securities and Exchange Commission (SECP) has introduced a new “passive equity sub-fund” under the Voluntary Pension Scheme, giving pension savers a simpler and lower-cost way to invest in the stock market.
Pakistan Passive Equity Sub-Fund
The Passive Equity Sub-Fund will be available from January 1, 2027, and will track a specified market index rather than randomly selected stocks, the SECP official said.
The new sub-fund will be offered alongside the existing equity, debt and money market sub-funds, giving pension savers a choice between actively-managed and passive investment strategies.
Under the new framework, fund managers may operate the passive equity sub-fund by directly tracking a specified market index or by investing in exchange-traded funds (ETFs) listed on the Pakistan Stock Exchange (PSX).
For the ETF-based option, the annual management fee will be capped at 0.75 per cent. The SECP said fund managers would not charge an additional fee when investing in their own ETFs.
“The primary objective is to provide simple and cost-effective options for long-term retirement savings and strengthen the national pension system,” Sidhu said.
Passive investment funds generally seek to replicate the performance of a market index instead of outperform it through frequent trading or individual security selection.
This approach can reduce management costs and provide investors exposure to the market.
The SECP said the passive equity subfunds would complement the existing investment choices available under the Voluntary Pension Scheme and help make pension savings more accessible to investors seeking a lower-cost equity option.
Pakistan needs to expand formal pension coverage and encourage greater long-term savings as its population ages and retirement financing needs increase.
The Voluntary Pension Scheme allows individuals to build retirement savings through professionally managed pension funds.
The new passive option also creates another potential channel for directing long-term household savings into Pakistan’s capital market, where pension funds can provide a stable source of institutional investment.
