In Pakistan, currently, both private and public sectors offer occupational saving schemes in the shape of gratuities, provident funds and pension. Under private sector schemes recognized by the Central Board of Revenue, the employer, participant and invested assets enjoy certain tax advantages. Public sector gratuity and pension schemes are non-contributory, unfunded and paid on a pay-as-you-go basis. In addition to this, provident fund schemes are available in which both the employer and the employee contribute. 

Majority of pension given in the country are Government sector pensions, which operate on the defined-benefit system. It not only creates huge liability for the government, but also reduces the incentive to save more than what is required by the scheme. Additionally employees miss out on the savings if they leave or switch jobs earlier than the qualification age or minimum service. 

The concept of well regulated private pensions in Pakistan originated from the budget speech, 2001 made by then Finance Minister and now Prime Minister, Shaukat Aziz. Subsequently, the SECP was given the mandate to regulate private pensions in Pakistan under the Securities and Exchange Commission of Pakistan Act, 1997. As the first step, the SECP, after in depth discussion and consideration, in January 2005, notified the Voluntary Pension System Rules, 2005 (VPS Rules, 2005). 

Under the VPS Rules, 2005 a system of private pensions has been introduced in the country. Asset management companies and life insurance companies, duly registered with the SECP under VPS Rules, 2005 to act as pension fund managers, shall manage pension schemes. The life insurance companies, in addition to pension products, shall also be authorized to offer annuity plans under the Voluntary Pension System (VPS).