The Securities and Exchange Commission of Pakistan (SECP) has introduced a new Passive Equity Sub-Fund under the Voluntary Pension Scheme (VPS), giving pension savers a low-cost way to invest in the stock market from January 1, 2027.

Pension fund managers will have to offer the new sub-fund alongside the existing Equity, Debt and Money Market Sub-Funds. Savers will be able to choose between actively managed equity funds and passive funds designed to track a specific market index.

The new Passive Equity Sub-Fund can track a market index directly or invest in exchange traded funds (ETFs). Under the ETF option, pension fund managers can invest in equity ETFs listed on the Pakistan Stock Exchange, allowing savers to gain diversified exposure to the equity market.

For an ETF-based Passive Equity Sub-Fund, the management fee will be capped at 0.75 percent annually.

SECP has also barred pension fund managers from charging an additional management fee when they invest the sub-fund’s money in ETFs managed by their own asset management company. This is intended to prevent savers from paying two management fees on the same investment.

SECP Chairman Dr. Kabir Ahmed Sidhu said the new sub-fund would give pension savers greater choice in managing their retirement savings while providing a cost-efficient way to participate in the stock market.

He said the reform would help increase participation in the voluntary pension system and strengthen long-term retirement savings.

The new sub-fund is aimed at expanding access to lower-cost investment options for retirement savings and supporting the development of Pakistan’s voluntary pension system.