SEC proposes changes to Provident Fund Act

Vorapol Socatiyanurak, secretary-general of the SEC, said last week that the SEC had agreed on four changes to the Provident Fund Act. First, an employee will be able to make a higher contribution to the company’s provident fund than the employer. The aim is to increase an employee’s savings. Currently, the law requires an employer to at least match the employee’s contribution.
Second, an employee will able to transfer his money paid out from his provident fund or left in the fund to a retirement management fund or any other fund for savings in case of work termination or retirement. This will let an employee keep his nest egg in a long-term fund.
Third, in case of an economic crisis or violence with widespread impact, which makes it impossible for an employee or employer to make contributions, both will be able to halt or postpone their contributions for up to one year each time. The relaxation of the rules will require the Finance Ministry’s approval each time. The period may be extended or other conditions may be imposed as necessary.
Last, a pooled-type provident fund will be able to opt to book some types of revenue to suit its members.
“Thailand is entering a greying society and ageing people may need to rely more on themselves. However, the savings rate for retired people is relatively low. The SEC is paying attention to building a culture of investment through long-term savings. The commissioners agreed on the law amendments, which will be forwarded to the Finance Ministry for further processing,” Vorapol said. The draft amendment bill will need to be approved by the Cabinet and the bill passed by Parliament. The amendments are not expected to be implemented this year.
Provident funds continue to grow. Their net asset value rose 7.3 per cent to Bt615.26 billion last year. Employers with provident funds increased 12.7 per cent to 11,249, while provident fund members were up 8.6 per cent to 2.3 million.
Last year 3,338 provident fund members requested to retain Bt4.89 billion, up 96.3 per cent. This is a good sign that members are concentrating on systematic savings after the Provident Fund Act’s amendment in 2008 allowed a member, whose provident fund membership expires due to work termination, to leave his money in the fund.
Last year, 3,348 employers gave provident fund members investment choices. This was 89.7 per cent more than the earlier year, due partly to the SEC’s policy of promoting companies and units to establish choices for employees and encouraging provident fund members to select an investment policy that suits their risk profile, Vorapol said.