SECP To Offer Low-Cost Passive Equity Pension Fund From Jan 2027
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✧ GENERATE BRIEFING
The Securities and Exchange Commission of Pakistan (SECP) has officially introduced a Passive Equity Sub-Fund under the Voluntary Pension Scheme (VPS) framework, providing retirement savers with a cost-effective, index-tracking mechanism to invest in the stock market. Scheduled to take effect on January 1, 2027, the sub-fund will operate alongside existing equity, debt, and money market sub-funds, giving investors a clear choice between actively managed portfolios and passive, benchmark-tracking strategies. Under the newly outlined guidelines, pension fund managers can replicate market indices either directly or through Exchange Traded Funds (ETFs) listed on the Pakistan Stock Exchange (PSX). To protect retail and long-term savers, the SECP has capped the annual management fee for ETF-based passive sub-funds at 0.75%. Furthermore, the regulator has prohibited double-charging in scenarios where a manager invests in ETFs managed by its own asset management company.
The Securities and Exchange Commission of Pakistan (SECP) has introduced a Passive Equity Sub-Fund under the Voluntary Pension Scheme (VPS), giving pension savers a lower-cost option to invest in the stock market through index-tracking strategies.
The new sub-fund will be offered by pension fund managers from January 1, 2027, and will be mandatory alongside the existing equity, debt and money market sub-funds. This will allow investors to choose between actively managed equity funds and passive funds that track a specified market index.
Under the new framework, pension fund managers can either directly replicate the performance of a market index or invest through Exchange Traded Funds (ETFs). In the latter model, managers can invest in equity ETFs listed on the Pakistan Stock Exchange, providing diversified exposure to the local equity market.
Fee Caps and Structural Safeguards
The SECP has capped the management fee for an ETF-based Passive Equity Sub-Fund at 0.75% per annum. The regulator has also prevented double charging where a pension fund manager invests in ETFs managed by its own asset management company.
According to SECP Chairman Dr Kabir Ahmed Sidhu, the new product will give pension savers greater choice while providing a cost-efficient way to participate in the stock market. The regulator expects the reform to encourage broader participation in the voluntary pension system and strengthen long-term retirement savings.
Expanding Retirement Investment Horizons
The initiative builds on the SECP’s wider reforms of the VPS framework aimed at increasing pension coverage and improving investment options for retirement savings. The regulator has previously allowed pension funds to access asset classes including ETFs, REITs, private equity and venture capital funds.
The passive investment structure could also help pension savers gain diversified exposure to equities without relying entirely on active fund-management decisions. Index-based investing generally seeks to replicate the performance of a selected market benchmark rather than actively selecting securities to outperform it.
The SECP said the latest measure is intended to expand accessible and cost-efficient investment avenues while strengthening Pakistan’s voluntary pension system and encouraging greater long-term savings through the formal financial sector.
