'Super savings funds' to replace LTFs

'Super savings funds' to replace LTFs

An advertisement for RMF and LTF funds are seen in Bangkok in 2015. (Bangkok Post file photo)
An advertisement for RMF and LTF funds are seen in Bangkok in 2015. (Bangkok Post file photo)

The cabinet has approved a new type of stock funds to replace tax-friendly long-term equity funds (LTFs) while doubling the amount people can invest in retirement mutual funds (RMFs).

From 2020 to 2024, super savings funds (SSFs) will substitute LTFs. Investments in SSF units are tax-deductible up to 30% of a buyer’s taxable income, but not more than 200,000 baht. When combined with investments in other retirement funds such as RMFs, provident funds, Government Pension Fund, National Savings Fund or premiums for pension life insurance policies, the total must not exceed 500,000 baht a year.

Unlike LTFs, which are required to invest only in Thai stocks, SSFs may invest in all types of securities. No minimum purchase is set and investors are not required to buy units every year.

SSF holders can sell units after 10 years and the proceeds are tax-exempted.

At the same time, changes were made to RMFs. Tax-deductible investments in the funds will double to 30% of taxable income but the cap remains at 500,000 baht when combined with SSFs and other types of retirement funds.

The existing minimum of purchases — 3% of taxable income or 5,000 baht a year, whichever is lower — was lifted to allow more people to invest in RMFs.

However, the existing condition requiring yearly purchases still applies.

While tax benefits for LTFs end this month, investors can still buy them and the Finance Ministry will amend related laws to waive personal income tax on gains when the units are sold.

Finance Minister Uttama Savanayana said on Tuesday the funds aimed to promote early savings and retirement planning among people.

“The introduction of SSFs and changes to RMFs’ rules will cost the government 14 billion baht a year in lost revenue but what we get in return is increased long-term savings among the people,” he said.    

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