ISLAMABAD, Feb 25: The Securities and Exchange Commission of Pakistan (SECP) has notified Voluntary Pension System (VPS) Rules, 2005, allowing the asset management and insurance companies to get licences for acting as pension fund manager.

An announcement issued by the SEC here on Friday said the rules have been finalized after seeking comments from the stakeholders. Under the VPS, life insurance companies would be authorized to offer annuity plans at the retirement age of the participants.

All Pakistani nationals, over 18 years of age, having a valid National Tax Number (NTN) and who are not employed in any position entitling them to benefits under any approved occupational pension scheme shall be eligible to contribute to the pension funds authorized by the SECP.

Pension fund managers will maintain separate pension accounts for each participant. The participants would be allowed to transfer the balance in their individual pension account maintained with a pension fund manager to another pension fund manager, say the rules. Balance in the pension fund would be invested in accordance with the criteria laid down by the SECP from time to time, the rules observe.

At the age of retirement, i.e. between 60 and 70 years or earlier (in case a participant develops disabilities), the participants would be allowed to withdraw 25 per cent of the amount in their individual pension account and the remaining amount would be used to buy an annuity contract from a life insurance company of his choice.

All other withdrawals, the rules say, would be subject to deduction of withholding tax and other conditions laid down in the Income Tax Ordinance, the rules observe. The SECP has constituted an advisory committee to develop guidelines and give its input on implementation process of the VPS.

The committee is being headed by commissioner specialised companies division, SECP, Salman Ali Shaikh and includes representatives from Mutual Funds Association of Pakistan, life insurance companies, Pakistan Society of Actuaries, Central Depository Company, Ministry of Finance and Employees Old Age Benefit Institution (EOBI).

First meeting of the advisory committee was held on Wednesday in Karachi. Life insurance companies and asset management companies willing to offer pension products can apply to the SECP for licensing as authorized pension fund managers under the rules. The companies are encouraged to complete all formalities for licensing/authorization of their products before July 1, 2005.