Amendments in Voluntary Pension System Rules, 2005

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN Islamabad, the /41/4' November, 2012 NOTIFICATION SA.0./376(1)/2012.— In exercise of the powers conferred by sub-section (1) of
section 282B of the Companies Ordinance. 1984 (XLVII of I984), read with clause (b)
of section 43 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997), the Securities and Exchange Commission of Pakistan, with the approval of the Federal Government, is pleased to direct that the following further amendments shall be made in the Voluntary Pension System Rules, 2005, the same for eliciting public comments have been previously published in the official Gazette vide Notification No. S.R.O. 055(1)12011, dated the 22 nd November, 2011, namely:- In the aforesaid Rules, - (1) in rule 2, in sub-rule (1),- (a) alter clause (b) the following new clauses shall be inserted, namely:- "(ba) "approved occupational savings scheme" shall have the same meaning as defined in clause (3E) of section 2 of the Income Tax Ordinance. 2001 (XLIX of 2001):
(bb) "approved superannuation Rind" shall have the same meaning as defined in clause (4) of section 2 of the Income 'Fax Ordinance. 2001 (XLIX of 2001);"; (b) in clause (c), after the word "Companies" the brackets and words "(Establishment and Regulation)" shall be inserted:

in clause (i), after the word "deed" the words "and any supplemental trust deed" shall he inserted; after clause (j), the following new clauses (ja) and (jb) shall he added, namely:- "(ja) "exposure" includes facility and subscription to or investment in equity securities, debt instruments or securities, units or certificates or shares of a collective investment scheme, money-market placements, deposits, certificate of deposits, CFS, forward contracts, derivatives and credit cards, but does not include￾obligations under letters of credit and letters of guarantee to the extent of cash mar g in held by an a facility provided to financial institutions through REPO transactions w ith underl y ing statutory liquidity requirement eligible securities; letters of credit established for the import or plant and machinery; and deposits of less than ninety days:
(jb) "facilit y" includes financing under a system which is based on participation in profit and loss, mark-up or mark-down in price, hire-purchase, lease, rent sharing, bills of exchange. promissory notes or other instruments with or without buy-back arrangement by a seller, participation

term certificate, musharika or modaraba certificate, term finance certificate or any other mode, guarantees, indemnities. letters of guarantee, indemnity, letter of credit and any other obligation, whether fund based or non-fund based;-; (e) in clause (m),- in sub-clause (iv), for the word "company", occurring twice. the words "pension fund" shall he substituted; tbr sub-clause (vi) the following shall be substituted, namely:- "(vi) mark-up accrued on any security in the portfolio shall be included as an asset of the pension fund if such accrued mark-up is not otherwise included in the valuation of the security;"; in sub-clause (vii), the word "and -. at the end, shall be omitted; in sub-clause (viii),- the comma and word ", taxes" shall be omitted; and for the words " other than the paid-up capital of the company- the words "and taxes" shall be substituted: and (v) after sub-clause (viii), amended as aforesaid, the following new cl ause s sh a ll be i n se rted . namely:- "(ix) the remuneration accrued up to the date of computation payable to the Pension Fund Manauer

!Or providing management and other services shall be deducted from the alue of the assets; a security not listed or quoted on a stock exchange, other than debt securit y , shall be valued at investment price or its breakup value as per last audited accounts. whichever is lower; and Government debt securities not listed on a stock exchange and traded in the interbank market shall he valued at the average rate quoted on a widely used electronic quotation system and such average rate shall be based on the remaining tenor of the security;"; (I) after clause (m), amended as aforesaid, the following new clause shall be inserted, namely:- "(ma) "offering document" means a document inviting contributions from eligible persons for a pension fund and includes all supplementary documents thereto or any document relating to an income payment plan; -: and (g) in clause (o), after the word "person", the words "who has contributed or" shall be inserted; (2) in rule 6,- in sub-rule (1), after the comma, occurring for the first time, the words and Figure "where the company has become ineligible to be registered in terms of rule 4 or" shall be inserted; and in sub-rule (3), for the word "licence", the word "registration" shall be substituted; (3) in rule 7,- (a) after the marginal note, the brackets and figure "(I)" shall be omitted:

in clause (e), tier the word "three", the word "four" shall be substituted; in clause (1). - after the word "first", the comma and word ",second" shall be omitted: and after the word "Fund" appearing lbr the first time, the words "and within two months of the close of second quarter" shall be inserted:
(d) for clause (j), the followin g shall be substituted. namely:- "furnish to the Commission a copy of its annual report together with copies of the balance sheet, profit and loss account, the directors' report and the auditors' report within one month of its annual general meeting and shall furnish its half yearly report to the Commission within two months of close of its half year:" (LI) in rule S.- after the word "shall''. the words "on behalf of a pension Fund" shall be inserted; in clause (g), the word "and", at the end, shall be omitted; in clause ill), for the full stop at the end, a semicolon and the word -; and" shall be substituted; and after clause (1), amended as aforesaid. the following new clause shall be added. namely:-

"0) enter into a short sale transaction in any securitv.:
(5) in rule 9,- for sub-rule (2). the following, shall be substituted, namely:- "(2) A pension fund shall be in the form of a unit trust scheme and such fund must be made up of an equitn„, sub-fund, debt sub-fund, a money market sub-fund and may have other sub-Rnds, if allowed by the Commission.":
in sub-rule (3), in clause (c), after the word "Commission", at the end, the words "or a copy of challan evidencing payment of' fee in favour of the Commission" shall be added; (c) after sub-rule (3), amended as aforesaid. the I011owing new sub￾rules shall be added, namely:- "(4) The Commission on receipt of application under sub-rule (3) and after seeking such further information as it may deem necessary authorize the pension fund as specified in Form IV. (5 ) The pension fund shall submit offering document. containing information as specified in Schedule III tbr approval of the Commission."; (6) in rule 12, in sub-rule (1),- (a) for the words " and are not employed in any position entitling them to benefits under any approved occupational pension scheme", the words, letters, comma and brackets "or, a Computerized National Identity Card (CNIC) or National Identity Card for Overseas Pakistanis (NICOP)," shall he substituted; and

(b) the proviso shall be omitted;
( 7 ) in rule 13,- in sub-rule (1). the comma and words ", subject to the limits prescribed under the income Tax Ordinance, 2001 (XLIX of 2001)" shall be omitted; and for sub-rule (2), the 1011owinu, shall be substituted, namely:- "(2) The amount of contribution can be paid in one lump sum or in installments into one or more pension funds." ( 8 ) in rule 14,- (a) in sub-rule (3),- the words "on any anniversary" shall be omitted; and for the word -prescribed", occurring twice, the word "specified" shall be substituted; (b) in sub-rule (4),- for the words "may be specified". the word "determined" shall be substituted; for the word "prescribed", occurring twice, the word "specified" shall be substituted: and (c) in sub-rule (5), for the word "prescribed", the word "specified" shall he substituted; ( 9) in rule 15,- (a) for the manzinal note, the followina shall be substituted. namely:-

• • 15. Change of pension fund and Pension Fund 'Manager by
  participant.--1
  (b) in sub-rule (1),- for the word "participants', the comma and words ", a participant" shall he substituted, and after the word "Manager", occurring for the second time, the words "or from one pension fund to another pension fund" shall be inserted; (c) after sub-rule (1), amended as aforesaid, the following new sub￾rule (1A) shall be inserted, namely:- "(IA) Subject to sub-rules (2) and (3), and provisions of Income Tax Ordinance, 2001 (XLIX of 2001), a participant shall be allowed to transfer his accumulated sum from an approved occupational savings scheme or an approved superannuation fund to a pension fund."; and (d) in sub-rule (2), after the word "Manager", occurring for the second time, the words "or from One pension fund to another pension fund and from approved occupational savings scheme and approved superannuation fund to a pension fund" shall be inserted; (c) in sub-rule (3), for the word "prescribed", the word "specified" shall he substituted; and for sub-rule (4) , the following shall be substituted, namely:- "(4) The transfer of individual pension account from one Pension Fund Manager to another Pension Fund Manager or from one pension fund to another pension fund shall only take place once in a financial year and the notice for the change of the Pension Fund Manager or pension fund, specifying the name of the new Pension Fund Manager or the pension fund shall be sent by the participant at least twenty-one days before the effective date of the proposed change.";

(10) in rule IL￾in sub-rule (1), alter the word "years" the words "or twenty-five since the age of first contribution to a pension fund. whichever is earlier" shall be inserted: and in sub-rule (2), in clauses (b), (c) and (e) the word "total" shall be omitted and thereafter in clause (d), the word "very" shall be omitted; (11) in rule 18,- (a) in sub-rule (1),-
0) for the word "interest", the word "mark-up" shall be
substituted; and
(ii) for clause (a). the following shall be substituted, namely:- "to withdraw up to fifty per cent or such percentage of the amount from his individual pension account as cash which is permissible under the Income Tax Ordinance, 2001 (XI.IX of 2001) and subject to payment of tax as required thereunder,":
in clause (c), Ibr the words "till age of seventy five years or earlier" the words "for up to fifteen years following the date of retirement" shall he substituted:
after clause (c), amended as aforesaid, the followin g new clause shall be added, namely:
"(d) the transfer of an individual income payment plan account from one Pension Fund Mana ger to another Pension Fund Manager or from one income payment plan to another income payment plan shall only take place once in a financial year and notice for the change, specifying the name of new Pension Fund Manager and the income payment plan shall be sent by the participant at least twenty-one days

betOre the effective date of the proposed change."; and (b) in sub-rule (2),- (i) for the words "no other option except ", the word "option" shall he substituted; and alter the word "choice", at the end, the words "or buy an income payment plan for another term or withdraw the amount from his account" shall be added; (12) in rule 20. in sub-rule (2). in clause (b),- alter the word "account", the words "or income payment plan account" shall be inserted; and for the word "the". appearing for the second time, the letter "a" shall be substituted; (13) in rule 23, in sub-rule (2), for the proviso the following shall be substituted, namely:- "Provided that the amount or method of calculation of such fees and charges shall be transparent and clearly disclosed in the constitutive document and offering document of the pension fund.":
(14) in rule 24,- for sub-rule (2), the following shall be substituted, namely:- "(2) The pension fund shall be divided into sub-funds to be called the equity sub-fund, debt sub-fund, the money market sub-fund and such other sub-funds as may be specified by the Commission."; and in sub-rule (3), for the word "determined", the word "specified" shall be substituted; I()

rule 26 shall be omitted; m rule 27, in sub-rule (1), after the word "shall'', the words "take exposure M any form or invest in debt or equity securities of connected persons or" shall he inserted:
(17) in rule 30,- in clause (b), after the brackets and letter "(a)", at the end, the words and symbol "having minimum A+ or equivalent rating from a rating company registered with the Commission:" shall be added; m clause (d), for the lull stop, at the end, a colon shall be substituted; and (c ) after clause (d), amended its aforesaid, the following proviso shall be added, namely:- "Provided that the trustee is registered with the Commission and has experience of acting as trustee of mutual funds or pension funds for at least three years."; (18) in rule 31,- for clause (b), the following shall be substituted. namely:- "be liable for an y loss caused due to its willful act or omission or that of its agent or delegate in relation to custody of assets or any investment forming part of the property of the pension fund;"; in clause (h). the word "and", at the end, shall be omitted; in clause (i), for the full stop, at the end, a semicolon shall be substituted; after clause (i), amended as aforesaid. the following new clauses shall be added. namely:- "(j) ensure that the Pension Fund Manager has specified a criteria in writino, to provide for a diverse panel of brokers at the time of offering of a pension fund or for any subsequent change;

(k) ensure that the Pension Fund Manager has been diligent in appointing brokers and shall not enter, on behalf of a pension fund, into transactions with any broker that exceed Fifteen per cent of the commission payable by a pension fund in any one accounting year:
Provided that this restriction shall not apply to transactions relating to money market instruments or debt securities.; (1) immediatel y inform the Commission if any action of the Pension Fund Manager contravenes any provision of the Ordinance, these rules, constitutive document, offering document, guidelines, codes. circulars, directives or any other applicable laws; and (m) comply with the directions of the Commission given in the interest of the participants."; (19) in rule 40,- (a) for sub-rule (1), the following shall be substituted, namely:- "(1) The index of the weighted average investment return of all sub-funds for all Pension Fund Managers shall be calculated by the Commission within ninety days of the end of each Financial year."; (b) for sub-rule (2), the following shall be substituted, namely:- "(2) The benchmark for the investment performance of the sub￾funds shall be the return of the index as determined in sub￾rule (I) less￾500 basis points for the Equity Sub-Fund Index:
two hundred basis point for the Debt Sub-Fund Index; and (c) one hundred and fitly basis point for the Money Market Sub-Fund Index."; and

(c) for sub-rule (3), the following shall be substituted. namely:- "(3) The benchmark referred to in sub-rule (2) shall be used to take corrective measures, including fine and cancellation of registration as Pension Fund Manager, as may be considered necessary by the Commission in respect of the Pension Fund Manager where the investment return in the sub-funds are found to be consistently below the specified benchmark, as measured on a three years rolling average basis.":
(20) in rule 41,-
(a) in sub-rule (1),- for the lull stop, at the cad, a colon shall be substituted; and alter sub-rule (1), amended as aforesaid. the following proviso shall be added. namely:- "Provided that Islamic funds and conventional lands shall be compared separately."; and (b) for sub-rule (2), the following shall be substituted, namely:- "(2) The comparative statements shall contain performance of pension hinds including fee structure, rate of return and any other material information relating to the past live years or since inception whichever is later."; (21) after Form Ill, the following new Form shall be added, namely:
"FORM IV
Isec rule 9(4))
SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN Islamabad, the Authorization No. AUTIIORIZATION OF PENSION Ft . D

The Securities and Exchange Commission of Pakistan. having considered the application for authorization of the and being satisfied that the said has provided in as specified under Schedule Ill. in exercise of the powers conferred by sub-rule (1) of rule 9 of the Voluntary Pension System Rules. 2005, hereby grants authorization to subject to the conditions stated herein below or as ma be prescribed or imposed hereafter. Signature of the Authorized Officer Name of the pension fund.":
(22) idler Schedule 11, the following new Schedule shall be ,added. namely:- "SCHEDULE ill !see rule 9(5)1 CONTENTS OF THE OFFERING D T- MENT OF Ti I E PENSION FUND Introduction of the Pension Fund Regulatory approval and consent i.e. registration of the Pension Fund Manager, authorization of the pension fund, appointment of the trustee and the registration of the trust deed, approval of the offering document and date of start of the public offer. Filing of the offering, document
4. Constitution of the pension Rind.
Name, registered address and place and date of authorization of the pension fund. S. Operators and principals. The names and registered address of the following parties, where applicable:
the directors of the company registered as Pension Fund Manager; the trustee:
foreign promoters. if any:
the distribution company, if any;
(e) the auditor;
(0 the legal adviser; and
(g) the investment advisor, if any.
6. Characteristics of pension fund.
The following shall be characteristics of pension fund; namely:-

eligibility:
application procedures;
) contribution procedures and minimum contribution, if any; individual pension account; change of pension fund manager; change of pension fund; register of the participants; retirement. age; benefits on retirement; withdrawal of hinds before retirement; benefits on death before retirement; instructions from the participants; the method of determining net asset value of the pension fund:
frequency of valuation of the assets and dealings etc; unit pricing and the circumstances under which it can change; the mode of announcement of net asset value and unit price; redemption of units on change of pension fund manager or withdrawal; the maximum interval between the request for redemption of units and the payment of the proceeds; and (xix) withholding tax and tax penalty.
7. Fees and charges.
The following must be stated, namely: - the maximum upfront fee payable to the Pension Fund Manager out of the contributions; the maximum fee payable to the Pension Fund Manager as annual management fee, expressed as a percentage of the net asset value of the pension fund; the level and basis of all other costs, fees and charges payable by a participant. remuneration payable to trustee and investment advisor; and (e) the level and basis of all other costs, fees and charges, etc., payable out of the pension fund.
8. Investment Policy and Restrictions:-
investment policy. investment restrictions.
(e) participant's rights in terms of investment choice. risk disclosure. disclaimer.
9. Change of Pension Fund Manager:-
The procedure and timing for transfer of the individual pension account to another Pension Fund Manager.
10. Distribution restriction policy:-

The distribution restriction policy shall indicate the fact that distribution of dividend shall not be allowed under the voluntar y pension system. A summary of the circumstances in which dealing in pension fund may be deterred or suspended. It must be stated that no money should he paid to any intermediary except the Pension Fund Manager or his authorized representative as prescribed.
13. Taxation:-
(a) detail of tax incentives (tax credit) available to the participants on contributions to the pension fund under the Income Tax Ordinance. 2001, with comprehensive illustrations; (h) detail of tax exemptions on investment income of the pension fund under the Income Tax Ordinance, 2001:
detail of the tax penalty (withholding tax) in case of early withdrawal or withdrawal in excess of the allowable limit as per Income Tax Ordinance, 2001; details of tax treatment in case of withdrawal after retirement and purchase of annuities or income payment plan.
14. Reports and accounts:-
annual accounting period of the pension fund:
individual pension account statements/contribution receipts to be issued to the participants and details to be stated therein; (c) periodic reports to he sent. to the participant and the Commission and the particulars of such reports.
15. Service to the participants:-
availability of forms:
register of the participants; information in the register of the participants; account statement. Financial Information. Warnings. Complaints. Transactions with connected persons:- This must be stated, in accordance with the Voluntary Pension System Rules, 2005.
20. Termination of pension fund:-

A summary of the circumstances in which, the pension fund can be terminated and consequences thereof, in accordance with the Voluntary Pension System Rules. 2005. 21 ioditication of the constitutive documents:- A statement of the means by which modifications to the constitutive documents can be effected, if any.
22. 1)clinitions.
tilossary.". l t .No. SEC SCD I PW 2012L22,0 Bushra Aslant Secretary to the Commission