Background

Mercy Corps Pakistan is an international non-profit organization operating humanitarian and development programs across Pakistan. The organization employs approximately 450 staff members located throughout the country.

Mercy Corps Pakistan intends to establish a Shariah-compliant employer-sponsored pension arrangement to support its End-of-Service Benefit (EOSB) program. The selected financial institution will be responsible for managing employer-funded retirement savings in accordance with Mercy Corps policies, applicable laws, and regulatory requirements.

The organization seeks proposals from SECP-licensed pension fund managers, asset management companies, or financial institutions authorized to establish and manage Voluntary Pension Schemes and Employer Pension Funds in Pakistan.

1.     Objective

The objective of this procurement is to select a financially sound and experienced institution capable of:

• Establishing and administering a Shariah-compliant Employer Pension Fund or equivalent employer-sponsored VPS structure.
• Managing pension assets in a conservative, low-risk investment environment.
• Supporting Mercy Corps-specific eligibility, vesting, forfeiture, and payout requirements.
• Providing efficient administration and reporting services.
• Maintaining appropriate governance, transparency, and compliance standards.
• Delivering high-quality support for Mercy Corps and its employees nationwide.

2.     Program Design Requirements

2.1 Funding Structure

The proposed arrangement shall support:

• Employer-only contributions.
• No employee contributions.
• Annual employer contributions equivalent to one month's salary per year of service.
• Additional employer top-up contributions arising from salary revisions.
• Maintenance of individual employee balances and records.

2.2 Eligibility Requirements

The system should support:

• Enrolments from date of employment.
• Tracking of employee service period.
• A minimum eligibility/vesting period of six (6) months.

Employees who separate from employment before completion of six months of continuous service shall not become entitled to the benefit.

The financial institution shall clearly explain:

• Whether contributions relating to non-vested employees can be returned to Mercy Corps.
• Operational procedures for processing such reversals.
• Any regulatory restrictions associated with such arrangements.

2.3 Benefit Administration

The provider should demonstrate its ability to support employer-defined benefit administration procedures, including:

• Maintenance of employee-level records.
• Identification of vested and unvested balances.
• Processing of benefit payments upon employer instruction.
• Support for adjustments arising from payroll corrections or salary revisions.
• Processing of employee separation events.

2.4 Employer Authorization Requirement

Mercy Corps requires maximum administrative control over benefit disbursement.

Bidders must explain in detail how their proposed structure can support:

• Employer authorization before release of any benefit payment.
• Suspension of payment pending completion of internal reviews or investigations.
• Deductions approved by Mercy Corps in accordance with applicable policies and laws.
• Maintenance of audit trails for all payment instructions.

The bidder shall clearly disclose any regulatory or legal limitations impacting employer control over employee balances or benefit payments.

3.     Investment Requirements

3.1 Shariah Compliance

The proposed solution must be fully Shariah-compliant.

The bidder shall provide:

• Details of the Shariah governance framework.
• Composition of Shariah supervisory arrangements.
• Shariah compliance certification.
• Details of ongoing Shariah reviews and audits.

3.2 Investment Strategy

Mercy Corps seeks a conservative investment approach focused on capital preservation.

The proposed strategy should:

• Prioritize preservation of capital.
• Invest primarily in low-risk Shariah-compliant instruments.
• Minimize volatility.
• Protect employee retirement savings from excessive market risk.

The bidder shall provide:

• Investment policy.
• Asset allocation strategy.
• Historical performance data.
• Historical volatility data.
• Details of any period in which negative returns were experienced.
• Risk management measures employed to protect capital.

4.     Taxation and Regulatory Compliance

The bidder shall provide a detailed explanation of the applicable tax treatment of the proposed pension arrangement under the prevailing laws and regulations of Pakistan.

At a minimum, the proposal should address the following:

4.1 Employer Contributions

The bidder shall clarify:

• Tax treatment of employer contributions made on behalf of employees.
• Any applicable limits, exemptions, deductions, or reporting requirements.
• Tax implications for Mercy Corps as the contributing employer.
• Whether employer contributions create any immediate tax liability for participating employees.

4.2 Investment Income

The bidder shall explain:

• Tax treatment of investment income generated within the pension arrangement.
• Any withholding taxes, exemptions, rebates, or regulatory considerations applicable to pension assets.
• Tax obligations, if any, applicable to participating employees in relation to investment growth.

4.3 Employee Benefit Payments

The bidder shall clearly specify:

• Applicable taxes and withholding requirements at the time of payment to employees.
• Tax treatment of benefits paid upon resignation, retirement, termination, death, disability, or any other separation event.
• Tax treatment of lump-sum benefit payments and any pension income streams, where applicable.
• Any distinction in tax treatment based on length of service, employee eligibility status, vesting status, age, or reason for separation.
• Employer responsibilities relating to tax withholding, reporting, and remittance.
• The methodology for calculating taxes at the time of final settlement and the party responsible for such calculations.
• Any supporting documentation, tax certificates, or reporting that will be provided to Mercy Corps and employees for compliance purposes.
• Applicability of Zakat deduction on employee balances and benefit payments.
• Procedures for claiming Zakat exemption, including required declarations, supporting documentation, deadlines, and administrative responsibilities.
• Responsibilities of the fund manager and Mercy Corps with respect to Zakat deduction, reporting, and record maintenance.

4.4 Recoveries, Reversals and Forfeitures

The bidder shall explain the tax implications associated with:

• Return of unvested balances to Mercy Corps.
• Reversal of contributions relating to employees who separate before becoming eligible under Mercy Corps policy.
• Employer-authorized deductions prior to benefit settlement.
• Adjustments resulting from salary revisions, benefit recalculations, payroll corrections, or contribution amendments.
• Forfeiture of benefits resulting from employee ineligibility or other circumstances permitted under applicable laws and regulations.

4.5 Ongoing Regulatory Compliance

The bidder shall:

• Confirm compliance of the proposed arrangement with applicable SECP regulations and Pakistani tax laws.
• Identify any regulatory limitations that may impact the proposed benefit design, including Mercy Corps' eligibility, vesting, forfeiture, and payout authorization requirements.
• Advise Mercy Corps of any expected changes in administration, taxation, reporting, or compliance obligations arising from future regulatory amendments.
• Describe how Mercy Corps will be informed of any material changes in the legal, regulatory, or tax framework affecting the arrangement.

5.     Scope of Services

The selected institution shall provide:

A. Fund Establishment and Administration

• Establishment of the pension arrangement.
• Procedures and service standards for employee onboarding and account activation.
• Procedures for processing employee separations, retirements, death claims, and disability settlements.
• Maintenance of beneficiary and nominee records for participating employees.
• Administration of Zakat declarations and exemption records, where applicable.

B. Reporting

Provide:

• Monthly contribution reports.
• Quarterly investment performance reports.
• Annual fund reports.
• Employee account statements.
• Vested versus unvested balance reports.
• Exception reports for employee separations.
• Any regulatory reporting required by law.
• Monthly service-level performance reports against agreed turnaround times.
• Pending settlement aging reports.
• Open complaint and grievance reports.
• Exception reports for delayed settlements and unresolved service requests.

C. Technology Platform

The provider shall offer:

• Secure online employer portal.
• Employee self-service portal.
• Mobile application (where available).
• Digital statements.
• Data export functionality.
• Data privacy and cybersecurity controls.
• Business continuity and disaster recovery capabilities.
• Secure storage and protection of employee and beneficiary information.

D. Customer Support

The provider shall clearly define and commit to service-level standards, including:

• Dedicated Relationship Manager.
• Dedicated service desk.
• Employee account setup turnaround time from receipt of complete documentation.
• Contribution posting and allocation timelines.
• Employee separation settlement processing timelines.
• Death claim settlement processing timelines.
• Permanent disability settlement processing timelines.
• Response timelines for employer and employee inquiries.
• Escalation procedures and timelines where service standards are not met.
• Monthly reporting submission timelines.
• Any additional service-level commitments applicable to the proposed arrangement.

E. Employee Communication

The provider shall:

• Conduct employee awareness sessions.
• Provide educational material.
• Offer retirement planning guidance.
• Support onboarding of new employees.

F. Business Continuity and Participant Protection

The provider shall describe:

• Business continuity arrangements and disaster recovery procedures.
• Safeguards to ensure uninterrupted administration of participant accounts during operational disruptions.
• Protection of participant assets and records in the event of financial distress, merger, acquisition, or change of fund manager.
• Transition procedures and participant communication plans in the event of replacement of the fund manager.
• Controls to ensure continuity of access to account information and benefit settlements during transition periods.

6.     Minimum Eligibility Requirements

Interested institutions must:

• Be licensed by SECP to offer VPS and/or Employer Pension Fund services.
• Have a minimum of five years' experience managing pension or retirement-related assets.
• Have audited financial statements available for the previous three years.
• Demonstrate strong institutional governance and compliance systems.
• Have a proven operating presence within Pakistan.
• Disclose any material regulatory actions during the previous three years.
• Maintain a current Asset Manager Rating of AM2 or above issued by a recognized credit rating agency in Pakistan (e.g., PACRA or VIS). Bidders holding an AM1 rating will receive additional scoring under the technical evaluation criteria.
• Submit a copy of the latest rating report and disclose any rating upgrades, downgrades, outlook revisions, or watch status issued during the previous three years.

7.     Proposal Submission Requirements

Technical Proposal

The technical proposal should include:

• Company profile.
• Ownership structure.
• Regulatory licenses.
• Pension product details.
• Assets under management.
• Pension assets under management.
• Organizational structure.
• Investment philosophy.
• Risk management framework.
• Shariah governance framework.
• Technology platform details.
• Proposed implementation methodology.
• Taxation and Regulatory Compliance
• Proposed service-level standards and turnaround times.
• Grievance and dispute resolution framework.
• Death benefit settlement procedures.
• Permanent disability settlement procedures.
• Business continuity and disaster recovery framework.
• Data privacy and cybersecurity framework.
• Transition and participant asset protection arrangements in the event of fund manager replacement.
• Zakat administration and exemption procedures.
• Client references.

Financial Proposal

Provide complete disclosure of:

• Management fees.
• Administrative fees.
• Trustee charges.
• Front-end or back-end loads.
• Account maintenance charges.
• Technology charges.
• Training costs.
• Any additional fees.

8.     Mandatory Bidder Response Requirements

Bidders must specifically address the following:

1. Can your proposed structure support a fully employer-funded pension arrangement?
2. Can Mercy Corps retain approval authority prior to benefit disbursement?
3. Can the structure support a six-month vesting period?
4. Can balances relating to employees who leave before vesting be returned to Mercy Corps?
5. Can employee balances remain subject to employer-approved deductions where permitted under applicable law?
6. How will vested and unvested balances be tracked and reported?
7. Can separate reporting be generated for:

a)     Active employees

b)     Terminated employees

c)     Vested balances

d)     Unvested balances

e)     Pending settlements

8. Provide examples of similar employer-sponsored pension arrangements currently managed by your institution.
9. Please clearly identify any regulatory, legal, operational, or tax-related limitations that may impact Mercy Corps' proposed benefit design, including employer controls over disbursements and treatment of unvested balances.
10. 10. Describe the proposed process for Zakat deduction, exemption management, and associated documentation requirements.
11. What are your proposed turnaround times for:

a)     Employee account setup

b)     Contribution allocation

c)     Employee separation settlements

d)     Death benefit settlements

e)     Disability settlements

f)      Employer and employee inquiries

12. Describe your escalation process and timelines for delayed settlements or unresolved service requests.
13. Explain the procedures, documentation requirements, and expected timelines for payment of accumulated balances upon the death of a participant.
14. Explain the procedures, eligibility requirements, supporting documentation, and settlement timelines applicable to permanent disability claims.
15. Describe the grievance and dispute resolution mechanism available to participating employees.
16. Describe the cybersecurity, data protection, disaster recovery, and business continuity arrangements applicable to the proposed solution.
17. Explain how participant assets, records, and benefits will be protected in the event of:

a)     Change of fund manager

b)     Business disruption

c)     Regulatory intervention

d)     Financial distress of the institution

1. Describe the proposed transition process if Mercy Corps elects to appoint a different fund manager in the future.

9.     Evaluation Criteria