Islamabad: The Securities and Exchange Commission of Pakistan (SECP) has announced the introduction of a Passive Equity Sub-Fund within the Voluntary Pension Scheme framework. Set to be available from January 1, 2027, this new investment option aims to provide pension savers with a straightforward and economical way to invest in the stock market.

According to Securities and Exchange Commission of Pakistan, the Passive Equity Sub-Fund will be offered alongside existing investment options such as Equity, Debt, and Money Market Sub-Funds. This initiative provides savers the option to choose between actively managed equity funds and passive equity funds that track a specified market index. Pension fund managers will have the option to manage the sub-fund by either directly following a market index or by investing in Exchange Traded Funds (ETFs). In the ETF-based model, investments in equity ETFs listed on the Pakistan Stock Exchange will allow for diversified exposure to the market.

The management fee for an ETF-based Passive Equity Sub-Fund will be capped at 0.75% per annum. If a pension fund manager invests in ETFs managed by its own asset management company, no additional management fee will be imposed, thus eliminating multiple layers of fees on the same investment.

Dr. Kabir Ahmed Sidhu, Chairman of SECP, commented that the introduction of Passive Equity Sub-Funds will enhance the options available to pension savers for managing their retirement savings. He stated that this reform is expected to encourage broader participation in the voluntary pension system and bolster long-term retirement savings.

The initiative is part of a broader effort to expand accessible and cost-efficient investment options for retirement savings and to strengthen Pakistan’s voluntary pension system.