The State Bank of Pakistan (SBP) has launched the Roshan Pension Plan (RPP), an innovative financial product designed exclusively for Non-Resident Pakistanis (NRPs) and Pakistani Origin Card (POC) holders. This initiative aims to provide a secure financial future for NRPs by enabling them to remotely contribute to a self-contributory defined contribution pension scheme. While the RPP offers several attractive features, a critical analysis reveals areas for potential improvement and considerations for extending the scheme to resident Pakistanis.
The RPP allows NRPs to contribute digitally and remotely, making it highly convenient for those living abroad. The end-to-end digital process simplifies participation and reduces the barriers associated with physical paperwork and in-person visits. Designed to be cost-effective, the scheme includes no front-end or back-end fees and a minimal fund management fee of up to 1.5%. Additionally, the absence of fees on premature redemption and the free transferability between pension fund managers enhance its attractiveness. Participants can start with a minimum contribution of PKR 10,000 and select the frequency of their contributions, providing flexibility to match their financial circumstances. The RPP offers three risk allocation schemes (medium volatility, low volatility, and lower volatility) that cater to different risk appetites, allowing participants to adjust their investment strategies based on their comfort with risk.
However, the exclusivity to NRPs and POC holders, while beneficial for the target demographic, leaves resident Pakistanis without access to a similar pension scheme. This creates a disparity in financial planning opportunities between NRPs and residents. Although the RPP aims to generate higher long-term returns, investments in equity and debt markets come with inherent risks. Participants need to be well-informed about these risks and the potential impact on their retirement savings. The eligibility age range of 18 to 70 years may exclude some potential participants who fall outside this bracket. Additionally, the requirement to redeem the pension after 25 years from the initial contribution or at the opted retirement age of 60 years may not align with the financial planning horizons of all individuals. Effective communication and education about the RPP are crucial, as NRPs may not be fully aware of the benefits, risks, and mechanisms of the scheme. SBP and associated financial institutions need to invest in outreach and educational initiatives to ensure informed participation.
Extending the Roshan Pension Plan to resident Pakistanis could provide significant benefits and address the current disparity in financial planning opportunities. Resident Pakistanis face similar challenges in securing their post-retirement financial stability, and a scheme like the RPP could offer a structured and flexible solution. Offering the RPP to residents would promote inclusive financial planning, allowing more Pakistanis to benefit from a structured pension scheme. This inclusion aligns with national objectives of financial inclusion and economic stability. By providing residents with access to a well-managed pension plan, SBP can mobilize domestic savings into productive investments, potentially boosting economic growth. Expanding the RPP to residents would enhance social security by providing a reliable source of income during retirement, reducing the financial burden on families and the state, especially in a country with limited social security systems. Increased participation in the RPP from both NRPs and residents could lead to greater fund stability and enhanced returns, benefiting all participants.
In conclusion, while the Roshan Pension Plan is a commendable initiative for NRPs, extending its benefits to resident Pakistanis would foster greater financial inclusion, economic growth, and social security. The State Bank of Pakistan should consider these potential advantages and take steps to broaden the scheme’s reach, ensuring a more equitable and prosperous financial future for all Pakistanis.
