GPF urged to invest more in equities
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The Government Pension Fund (GPF) has been urged to invest more in equities, while members were encouraged to make maximum contributions to make sure they have adequate savings after retirement.
“The 35 per cent allocated to equity is extremely low,” Naomi Denning, managing director of Towers Watson of Hong Kong, said yesterday at a GPF symposium.
She referred to the GPF allocating a large portion to the fixed-income instruments – 68 per cent at the end of last year – mainly government bonds, against a smaller slice allocated to investment in shares.
Thanasak Karnasuta, general manager of the Shell Thailand group pension, echoed Denning’s view, noting that the Shell pension fund had invested 40-65 per cent of its portfolio in equities.
“If you want higher returns, you have to take risks,” he said.
Responding to Denning’s comment, Sopawadee Lertmanaschai, secretary-general of the GPF, said it might offer new investment choices that allow some members to invest more in equities.
“Globally, the average equity investment of pension funds is about 40-50 per cent of the portfolio, while some funds allocate as much as 70-80 per cent of total assets to equities,” she said.
Fund managers in other countries think conservative investments will not yield enough returns for pensioners. Sopawadee said the GPF would consider offering new investment choices that would weight more highly on stocks.
Currently, 99 per cent of the 1.2 million GPF members choose the most conservative investment policy, which invests only 20 per cent in equities, she said. The total GPF investment portfolio at the end of last year was worth Bt517 billion.
Higher contributions
GPF members were also urged to pay higher contributions to the fund. “You must be convinced to contribute at the maximum rate,” Thanasak said.
Under the GPF law, the minimum contribution is 3 per cent and the maximum is 12 per cent of salary. “We urge members to contribute 12 per cent. At least they get a tax deduction,” Sopawadee said.
In some countries, the government matches higher contributions made by employees, but the Thai government pays a flat rate of 3 per cent. The government chooses to increase salaries for government officials instead of increasing its contribution to the fund, Sopawadee said.
“As the GPF celebrates its 15th anniversary this year, it may be the right time to think about increasing contributions,” she said.
Areepong Bhoocha-oom, chairman of the GPF, said that in Thailand, pension-fund assets were only 17 per cent of gross domestic product, much lower than in other countries. “And that signifies that we need to work harder to get more elderly people well prepared for retirement, and we have a small amount of pension assets to help stimulate the economy,” he said.
Among developed countries within the Organisation for Economic Cooperation and Development, pension-fund assets averaged 67 per cent of GDP last year.
