TBMA looks into elderly savings scheme

TBMA looks into elderly savings scheme

The National Statistical Office says Thailand will become an aged society in 2021.
The National Statistical Office says Thailand will become an aged society in 2021.

The Thai Bond Market Association (TBMA) is studying a savings scheme for the elderly in preparation for when Thailand becomes an aged society.

Thailand will become an aged society in 2021, when Thais aged over 60 years will account for 20% of the country's total population, according to the National Statistical Office.

In 2031, Thailand will become a super-aged society. By then, the elderly population is expected to account for 28% of the country's population.

The number of older people in Thailand stands at about 11 million.

Ariya Tiranaprakit, senior executive vice-president at TBMA, said the association is studying a measure to support savings and investment for retirement implemented in Japan to see whether the measure can be adopted in Thailand.

"There is no clear conclusion yet," Ms Ariya said. "We are studying Japan because the country has been designated an aged society for decades."

Japan's government has a scheme to encourage long-term savings and investment for the elderly and working people called the Nippon Individual Savings Account (NISA) tax exemption scheme.

This savings scheme is available for many asset classes and has a tax-exempt period of up to 20 years, Ms Ariya said.

According to the Japan Securities Dealer Association (JSDA) website, the scheme is intended for any resident of Japan aged 20 or older.

With an NISA account, all individuals are eligible for an exemption to the 20% levy on income from capital gains and dividends from annual investments of up to ¥1 million (281,829 baht) made over a five-year period, as long as they reside in Japan.

The NISA is expected to stimulate medium- and long-term asset formation among individuals and encourage people to prepare for the future by accumulating financial assets, according to the JSDA.

Another expected benefit of the NISA is to function as a conduit of capital for growth funded by household financial assets and to support promising businesses.

"Thailand also has long-term tax exemption schemes, such as long-term equity funds, but the tax exemption is unlikely to be extended from this year's expiration," Ms Ariya said. "There are also retirement mutual funds, but the choices of investment assets are limited."

Ms Ariya said the NISA has two types of investment options: Junior NISA and Instalment Type NISA.

The Junior NISA allows people and the elderly to save or invest for children under 20 years old, with a tax exemption applied until the children turn 20.

The feature gives children a lump sum, reducing parents' future burdens and promoting investment and saving habits.

The Instalment Type NISA, an individual savings account, is tax-exempt for up to 20 years, helping people rely less heavily on social welfare.

"The Japanese government promotes monthly instalment savings and does not limit the types of assets under this scheme," Ms Ariya said.

It would be better if the government had a tax exemption scheme for the general public, she said, as there are many investment asset classes apart from mutual funds or bank deposits.

Regarding the Finance Ministry's planned imposition of a 15% withholding tax on fixed-income funds, expected to take effect by mid-year, this could have an impact on retirees investing in fixed-income securities through mutual funds, Ms Ariya said.

"We assume that the retirees prefer to invest in bonds, as observed by swift sales of the Finance Ministry's savings bonds available for investors aged 60 years old and above," she said.

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