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Protection of Pension Fund: Role of Trustee

This article discusses the important role of a trustee in protecting pension funds within the Voluntary Pension System (VPS) and other pension systems. It covers the appointment and eligibility criteria of a trustee, their obligations under the VPS Rules, and the protection of pension funds through trusteeship. The article also highlights key operational controls of a VPS trustee.

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Protection of Pension Fund: Role of Trustee

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  1. Role of Trustee In Protecting The Pension Fund Under The Voluntary Pension System (VPS) And Other Pension Systems Presented by: Mohammad Hanif Jakhura Chief Executive Officer September 5, 2005 The Central Depository Company of Pakistan Limited

  2. Appointment of Trustee according to VPS Rules, 2005 • The Pension Fund Manager (PFM) shall appoint a Trustee for every fund • Trustee and PFM must be independent • The Commission may, in the interest of the participants, capital market and public, give directions to the Trustee • A Trustee may retire with the prior approval of the Commission

  3. Eligibility Criteria of a Trustee underVPS Rules, 2005 • A scheduled bank • Having A+ rating • Been in business for atleast five years • A trust company - subsidiary of a scheduled bank • A foreign bank • Operating as scheduled bank in Pakistan • Providing Trustee services internationally • A central depository company approved by the Commission

  4. Regulatory / Legal Frame work Income Tax Ordinance, 2001 VPS Rules, 2005 Trustee of VPS Trust Deed & Offering Document Companies Ordinance, 1984

  5. Obligations of the Trustee under VPSRules, 2005 • Take control of all the property of the Fund. The title of all the Fund’s property shall be vested in the Trustee [VPS Rule 31 (a)] • Be liable for any act or omission of any agent appointed by the Trustee [VPS Rule 31 (b)] • Ensure that the methods adopted in calculating the value of units are in accordance with the constitutive documents [VPS Rule 31 (e)]

  6. Obligations of the Trustee under VPS Rules, 2005 (cont….) • Ensure that the unit price is calculated and applied in accordance with the provisions of the constitutive documents [VPS Rule 31 (d)] • Carry out the instructions of PFM if they are not in conflict with the constitutive documents [VPS Rule 31 (f)]

  7. Obligations of the Trustee under VPS Rules, 2005 (cont….) • Ensure compliance with the investment policy and borrowing limitations as set out in the constitutive documents [VPS Rule 31 (g)] • Issuance of annual report to participants as to whether the PFM has managed the Fund in accordance with the constitutive documents [VPS Rule 31 (h)] • Ensure that units are allocated after receiving contributions [VPS Rule 31 (i)]

  8. Protection of Pension Funds through Trusteeship • Based on the Trustee’s report to the Commission, the Commission may cancel / suspend / remove the registration of PFM • PFM shall account to Trustee for any loss caused to the Fund’s assets due to his negligence / willful act / omission • Trustee’s consent would be required by the PFM to appoint auditor for the Fund

  9. KeyOperationalControlsof VPS Trustee • Delivery Vs Payment • Portfolio position • Fund position • Daily reporting • Review of Fund’s financial statements

  10. Thank you !

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