Pakistan Pension Fund

Pakistan Pension Fund (PPF)

Voluntary Pension Plan

Voluntary Pension Plan is a very flexible savings cum investment plan which facilitates individuals to save for their retirement in a systematic way, topping up their savings with investment returns at their optimal asset allocations and granting them special tax benefits, with numerous valuable options before, at and after retirement.

Monthly Contributions

The plan could be started with a minimum contribution of Rs. 1000/- or more. It is desirable that the investor increases his contributions by a certain percentage each year according to rise in his/her income levels for the plan to work best.

Tax Advantage

The participant can save tax on contributions made within limits set by the SECP. Participants starting at a higher age are given more encouragement by allowing them opportunity to save more tax. Tax savings can be substantial over years of accumulations.

Job Mobility

Unlike other occupational pension plans where there is usually a vesting period (before pension starts to accumulate) and a minimum service period (before which an employee doesn’t receive anything in lieu of his/her pension fund accumulated), the Voluntary Pension Plan is free from such hindrances, which means an individual can start accumulating his/her pension fund the day he/she wishes to (whether employed or not) and transfer his/her fund from one employer to another (in case empoyed) no matter how long he/she has been in employment and how small the size of his/her fund is.

Individualized Asset Allocation

Each and every individual shall have a choice of choosing the investment asset allocation for his/her fund independent of anyone else’s choice, whether he/she is entering the fund as an independent individual or through an employer. This is very different from the conventional retirement funds where a single investment strategy (that is usually to invest majority of funds in government debt) governs fate of all employees’ retirement savings.

Investment Choices

The participant holds investment choice between various allocation schemes that we offer, each of which is invested in different proportions in the three sub-funds on offer. A matrix of the investment choices offered is as follows:

Allocation Scheme

Plan *	Debt Sub-Fund	Equity Sub-Fund	Money Market Sub-Fund

Aggressive Plan	20% - 35%	65% - 80%	Nil
Balanced Plan	40% - 55%	35% - 50%	10% - 25%
Conservative Plan	60% - 75%	10% - 25%	15% - 30%
Very Conservative Plan	40% - 60%	Nil	40% - 60%
Life Cycle Plan **	Starting with 20% Debt / 80% Equity allocation, the allocation scheme is gradually changed to reach 80% Debt / 20% Equity by the time investor reaches retirement age. See Annexure for detail.

Names (aggressive, conservative etc) of these plans are set as decided by the SECP. Their risk/ return profile is not necessarily as these names suggest.

Once a participant chooses a scheme he/she will have the option to change it and transfer his/her funds to another scheme free of cost once a year.

Which Investment Plan is best for me?

With such great flexibility and investment choice, deciding on which investment plan to choose can be a major and difficult decision for many individuals. Our sales team and other experts at Arif Habib Investments are highly trained to guide each investor individually and personally about the risk profile specific to him/her and which investment choice he/she should go ahead with. The basic purpose is to enable the individual take an educated informed decision after fully understanding how risks and rewards of different investment choices affect his/her individual circumstances. At AHIML we treat each customer personally.

Dynamic Life Cycle Plan

This plan works on automatic investment switching as an individual’s age changes. As is obvious, when retirement is far, more equity exposure is needed and as retirement approaches, equity is replaced by debt and money market instruments.

Retirement

Retirement age may be chosen anywhere between 60 to 70 years.

Options at Retirement

At retirement the individual has an option to withdraw up to 25% of his/her fund as tax free lump-sum. With the remaining balance, he/she can either right away enter into an annuity with an insurance company of his/her choice, or choose to defer purchasing the annuity until a maximum age of 75 and enter into an income drawdown plan to cater for his pensions until then.

Dynamic Income Drawdown Plan

It is not always desirable or advisable to purchase an annuity right from the date of retirement. The income drawdown plan gives the retiree control over his/her funds and time to defer purchase of an annuity for any reason up to a maximum age of 75 years. An income drawdown plan consumes savings in the Individual Pension Account for a few years after retirement (before age 75) by withdrawing cash from the account on a regular monthly basis, before ultimately purchasing an annuity itself with the amount remaining in the fund when the income drawdown plan is terminated. Payments from an income drawdown plan are designed to increase each year to maintain lifestyle of the retiree in times of increasing inflation.

Insurance Covers

These include life, disability and illness insurance. The plan would really be incomplete without insurance, especially in the early years of individual’s age when his/her savings in the fund are not enough to provide for his/her dependants in the unfortunate case of his/her death in early years. For an individual this gives ultimate security of securing his/her dependents in case of early death, securing his/her own income during disability or illness and securing his/her retirement when he/she reaches that point. However the choice of insurance or whether to choose any at all lies with the individual or the institution.

All investments in mutual funds and securities are subject to market risk. The NAV based price of these units and any dividends and return thereon are dependent on forces and factors affecting the capital markets. These may go up or down based on market conditions. Past performance is not necessarily indicative of future results. Please read the Offering Document to understand the investment policies and the risk involved.