Bangkok, 2 September 2016 ? In preparing the workforce for their retirement, the SEC is encouraging employers from both public and private sectors to support their employees? retirement savings through a provident fund (PVD) scheme.

SEC Secretary-General Rapee Sucharitakul said: ?The national population is undergoing a major structural change toward becoming an aged society. By 2025, the 60-years-old and older would account for approximately 20 percent of the total population. Pension or traditional welfare alone is unlikely to sufficiently maintain the retirees? living standard. In light of the above, PVD could be another safety net for the labor force besides social security.?

Currently, the average contribution of employers and employees nationwide is 5 percent each, as opposed to the maximum permissible rate of 15 percent. The majority of PVDs invest as much as 85 percent of the total investment money in debt securities and bank deposits. Such low-risk, low-return pattern results in slow fund growth and could eventually generate an insufficient sum for post-retirement living.

In addition, studies show that more than 50 percent of the PVD members has received less than 1 million baht upon retirement. If their post-retirement longivity expands 20 years or more, they would have less than 4,000 baht monthly allowance, which is significantly lower than the minimum rate of 10,000 baht estimated by the National Statistical Office.

Given such circumstances, the employers should play a greater role in supporting their employees? retirement savings through a well-planned PVD that offers various member-oriented features, for example, automatic contribution increase in line with salary or wage raise, employees? choices based on risk appetites and lifepath or target date investment policies that are adjusted according to members? age and investment period, respectively.  

Employers? educational activities and other tools could also help PVD members to better prepare for their retirement. Meanwhile, the SEC in cooperation with the Association of Investment Management Companies (AIMC) and the Stock Exchange of Thailand (SET) holds PVD seminars and events periodically to educate fund committees to be able to fully protect the best interest of the fund members. 

Pursuant to the recent amendments to the PVD regulations, employees are now allowed to increase their contribution rate independently from their employers, and can choose to receive their benefits in instalment after retirement, as opposed to a one-off total sum, and may choose to transfer the total benefits to a retirement mutual fund (RMF) after the PVD plan has ended to maintain the benefit of continuous saving.

?The post-retirement issue is getting more complicated as the society is moving toward longer lifespan and higher living costs especially medical expenses. Besides, low-risk products offer low-return, while high-risk-high-return products come with high volatility. All of these factors make it more challenging to ensure sufficient post-retirement savings.  However, PVD could still be a success factor if all parties involved seriously learn to make the most out of this retirement savings tool,? Mr. Rapee added.