Mandatory fund options mulled
Regular payments for retired 'under study'
The Finance Ministry is considering broadening the payment options for members of the imminent mandatory provident fund when they retire, according to a source.
A draft bill on the mandatory provident fund has been designed to give lump sum payments to members after they retire, but the ministry is looking at ways to provide the option of regular payments, as is given to civil servants, given increasing life expectancy, according to a source at the ministry who asked not to be identified.
The draft bill will be deliberated by the National Legislative Assembly after having won cabinet approval.
The Finance Ministry's reservations on widening the mandatory provident fund's options are mainly because monthly payouts will be low, assuming minimum contribution of 3% of base salary, the source said. The Fiscal Policy Office (FPO) has said that it aims to provide future retirees with 50% of their final month's salary to maintain living standards in retirement.
The government has made big strides in pushing a series of measures to enforce the retirement safety net to ease the state's financial burden as the population ages.
The mandatory provident fund, expected to be enforced in 2018, will require employers and employees each to contribute 3% of the employee's salary for the first three years to the fund before increasing it to 5% during the fourth to sixth years, 7% between the seventh and the ninth years and 10% from the 10th year onwards, with base salary capped at 60,000 baht per month. The rise in contributions will also be subject to economic conditions.
The law requires companies with 100 employees or more to match employees' contributions to the fund within the first four years of its enforcement.
Companies with at least 10 employees will have to offer compulsory retirement savings from the fourth year of implementation, and those with only one employee must contribute from the seventh year.
The government in 2015 successfully pushed for the establishment of the National Savings Fund, a voluntary retirement safety net for 25 million non-formal workers.
Apart from the mandatory provident fund, the cabinet last year also approved a package allowing companies that hire ageing workers with a salary of 15,000 baht a month or less to be eligible for a double corporate tax deduction on expenses incurred. Other measures in the package included reverse mortgages -- a home loan that allows the elderly to convert their home equity into cash.
For members of the mandatory provident fund to meet the FPO target of 50% of their final month's salary in retirement, they will need to contribute 5% of their salaries, with the matching contribution from their employers, in combination with the old-age pension paid by the Social Security Fund.
The source said the Finance Ministry is changing its plan to use a redirected portion of sin taxes (taxes from cigarette and alcohol sales) from the Thai Health Promotion Foundation and the National Sport Fund to finance the increased portion of the monthly living allowance for poor elderly people.
It is now looking at using the annual budget to fund the rises.
The ministry estimates it needs 4 billion baht to finance incremental portions to raise the living allowance to 1,200-1,500 baht per person per month. All elderly citizens are now entitled to the stepped-up living allowance, with 600 baht paid to those aged 60-69, 700 baht to those aged 70-79, 800 baht to those aged 80-89, and 1,000 baht to those aged 90 and older.