KARACHI - The size of private pension funds industry reached Rs778.4 million during FY08 on account of tax incentives on funds investment by fund managers. Since the pension funds saving scheme became operational (FY08), asset composition of the funds shows that around 96 per cent of total assets are currently placed in the form of investments and cash/deposits. At the end of FY08, pension fund also recorded Rs28.2 million as net investment income and Rs 14.8m as operating expense. According to some preliminary information related to Funds performance, the investments of these pension funds is largely concentrated in three types of funds namely equity Sub-fund, Debt Sub-Fund and Money Market Sub-Fund. The shares of equity, debt and money market funds in total investments are 52.3 percent, 25.7 percent and 22 percent, respectively. On liabilities side, these investments are largely financed by seed capital contributed by pension fund managers which constituted 91.5 percent of total contribution. However, the contribution from the employer and employees/individuals remained yet to accumulate. It may be pointed out here that currently, there are four Islamic funds and three conventional funds, which are being offered such services in private sector. Islamic funds are Meezan Tahaffuz Pension Fund, Pakistan Islamic Pension Fund, Atlas Pension Islamic Fund and JS Islamic Pension Savings Fund. Three conventional funds include Pakistan Pension Fund, Atlas Pension Fund and JS Pensions Savings Fund. The asset size of the private pension funds and the recent introduction of VPS by SECP indicate that these developments are still at an early stage of development. Investment activities of the pension funds are according to the investment policy as prescribed by SECP under VPA Rules, 2005, where these funds have been allowed to invest in various types of eligible funds. SBP in its new report mentioned that keeping in view the welfare aspects and potential hidden in occupation savings or pension schemes; the government initiated reform process during 2001 to develop a regulatory framework for both public and private occupational saving and pension system and announced tax incentives for investments into these pension schemes. Further, SECP in January 2005 has designed a necessary formwork called Voluntary Pension System (VPS), the legal framework of which has been notified under the VPS Rules 2005. Under this VPS, SECP has granted license to four asset management companies that would act as a Pension Fund Manager and are eligible to offer Voluntary pension funds under VPS Rules. In order to encourage privately managed pension schemes such as VPS, there is a need to focus on the implementation of financial education programs meant to increase the knowledge and awareness of the young population on issues related to financing their future stream of income under these pension plans and to improve literacy of overall financial issues.