What is the Voluntary Pension System?

The Voluntary Pension System (VPS) lets people in Pakistan save for retirement on their own, through pension funds run by licensed asset management companies and regulated by the SECP. It is useful for anyone without a company pension, such as the self-employed or people working abroad.

You open a pension account with a fund manager and contribute whenever and however much you like. Inside the account you choose how your money is invested, from safer debt and money market funds to shares, and you can change the mix as you get older. Both conventional and Shariah-compliant versions are offered.

Contributions can earn a tax credit under the Income Tax Ordinance, within a limit tied to your taxable income. The rules on how much qualifies change with the budget, so check the current year's figures with the fund manager or a tax adviser.

You choose a retirement age, normally between 60 and 70. At retirement you can take part of the balance as a lump sum and use the rest for a regular income. Taking money out early is allowed but may mean paying back tax benefits. MUFAP, the mutual funds association, lists every pension fund and its returns.