AoP says time right for revamp

AoP says time right for revamp

The Association of Provident Funds (AoP) has proposed to the Finance Ministry that 7.3 million Social Security Fund members who are not covered by any provident fund should be the initial target group for the mandatory provident fund scheme.

Mr Pisit says reform is needed to prepare for an ageing society. SAKESAN ROJMETHAKUL

The mandatory provident fund should later be extended to non-formal employees such as taxi drivers, said Pisit Lee-ahtam, AoP president and a former deputy finance minister.

At present, Thailand has 37 million workers, with 10 million being Social Security Fund members, and 2.7 million of them are also members of a provident fund. Another 2 million employees are covered by the Government Pension Fund but they are not required to be Social Security Fund members due to overlapping healthcare benefits.

The mandatory provident fund scheme is among the issues which the junta has instructed the Finance Ministry to look into aimed at providing formal retirement protection for the elderly and easing the government's burden of taking care of them.

Mr Pisit said it was the right time to reform the country's long-term savings to prepare for Thailand's ageing society in the next decade.

"Assets under management of provident funds are around 700 billion baht currently. The size of such long-term funds will be enlarged if we can draw new members from the first target group and such funds could be used to invest in the government's infrastructure projects and this will help narrow public debt and strengthen the country," he said, adding the AoP is ready to help set up the mandatory provident fund.

He said the AoP had also proposed the Finance Ministry allow employees to contribute to provident funds at a higher rate than employers' contribution to encourage savings as well as allow both outsourced and contingent workers to get the same benefits as employees as provident fund members.

Thailand has had a voluntary provident fund for more than a decade, and the law requires employees to contribute in the range of 2-15%, while employers are required to at least match the rate.

He said since Thailand's total provident fund was still far smaller than those elsewhere in the region such as Singapore and Hong Kong, the government should speed up securing more long-term funds to handle the approaching ageing society.

Mr Pisit, separately, said the Social Security Fund also should take this opportunity to reform itself. Sweden has changed its social security fund's platform and divided savings between investment and health care, while Thailand's scheme remains unchanged.

"We will become a fossil of Sweden' s social security fund," he said.

In the meantime, chief executive at CIMB Principal Thailand Jumpol Saimala urged people to start saving more money as soon as possible due to rising inflation each year.

People typically spend all their savings from their provident funds within nine years after they retire, so they have two alternatives — saving more or investing for higher returns — to fund their retirement.

CIMB Principal Thailand yesterday launched the Target Date Retirement Provident Fund, which features an automatic change in asset allocation that fits with the age of each provident fund member. For example, members aged 20-40 can take more risks, so they can allocate more assets in equity. For those aged 40-60, their assets in provident funds will weight more on fixed income and money market instruments.

The National Housing Authority's (NHA) provident fund is the first organisation to use CIMB Principal Thailand's new provident fund product.

The NHA's provident fund had total assets of 2.03 billion baht as of July 2014, with 1,603 members, 200 of whom have applied for the new product.

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