The Finance Ministry's Fiscal Policy Office (FPO) is set to enforce the long-delayed mandatory provident fund scheme by 2018, according to senior officials.
The move is part of the government's bid to ensure people have a comfortable retirement and alleviate the state's burden in taking care of the elderly.
The scheme requires companies with 100 employees or more to match employees' contribution to the fund from the first year of its implementation.
Companies with at least 10 employees will have to offer the compulsory retirement savings scheme from the fourth year of the implementation of the scheme, and those with only one employee must make such a contribution in the sixth year, director-general Krisada Chinavicharana said.
However, listed companies, state enterprises, public organisations and companies in receipt of investment promotion privileges and government concessions must set up mandatory provident funds in the first year the savings scheme comes into force, he said.
Krisada: Contributions to be gradually raised
Some private companies provide provident funds for employees, but it is voluntary. According to Thai Provident Fund data, 15,496 employers offered provident funds to 2.78 million employees and the entire provident funds' net asset value at the end of last year amounted to 883 billion baht.
The government has pushed for the reinforcement of the retirement safety net. Last year, it set up the National Savings Fund (NSF), a voluntary pension fund for 27 million non-formal workers, and allowed provident fund members to make higher contributions than their employers.
Moreover, it is seeking to implement the reverse mortgage scheme, a loan for senior citizens by allowing them to convert equity in their homes into cash.
Apart from the NSF, the state is offering the Government Pension Fund, a non-contribution pension for state officials; and the Social Security Fund, which provides a living allowance for the elderly.
A recent study by the FPO found that 12 million workers covered by social security funds have an average post-retirement income of 40% of their pre-retirement income, while it is 70% for 3 million state officials.
Mr Krisada said the contributions of employers and employees to mandatory provident funds will be equal and gradually raised.
According to the requirements, employers and employees must contribute 3% of monthly salary but not exceeding 1,800 baht to mandatory provident funds each month in the first three years of its implementation. The contribution will rise to 5% but not exceeding 3,000 baht between the fourth and sixth years, 7% but not exceeding 4,200 baht during the seventh to the ninth years, and 10% but not exceeding 6,000 baht from the 10th year onwards.
A National Pension Fund Policy Committee, to be chaired by the prime minister, will be set up to create policies and supervise the funds.
"The [mandatory provident] fund is expected to take place around 2017-18," said Banthornchome Kaewsa-ard, fiscal policy adviser to the FPO.
In order to reduce opposition from the public sector, the government may initially allow business operators to lower their current contribution to voluntary provident funds and shift that part to the mandatory funds, she said.
Ms Banthornchome said the mandatory provident funds will seek Finance Minister Apisak Tantivorawong's approval before being forwarded to the cabinet.
Thailand has already entered into an "ageing society" defined by the UN and it will become an "aged society" in 2025, she said. A society is considered to be ageing when one-tenth of its population is aged above 60, and aged when one-fifth is aged above 60.
In a related development, Ms Banthornchome said the Bank of Thailand was not opposed to the reverse mortgage scheme and the Finance Ministry was considering an appropriate model.
Kasikornbank has shown interest in the reverse mortgage scheme.