GPF amendment to allow more member choice

Thailand’s Government Pension Fund is in the process of amending the GPF law to let new members select their own investment plan instead of automatically entering into its investment plan for retirement.

The amendment has had a public hearing and awaits cabinet approval, said GPF acting secretary-general Sikanya Yatip.

At present, the GPF has five investment plans: a low-risk money market plan, a mandatory plan, a fixed-income plan, an equity plan and a life-path plan, which is the latest addition.

The mandatory plan applies to members who have not selected any investment plan, meaning they enter it automatically.

Under the GPF law, this plan will invest in highly secured assets such as deposits and fixed income for at least 60% of contributions.

Ms Sikanya said the return from the mandatory plan of 6.5% is quite good, but it would be better for new workers to seek a higher return from higher risk investment at a younger age.

A higher return would mean a better quality of life at retirement age.

“Normally, new workers will stay with the GPF for about 37 years if they stay until retirement, and some 30,000 new members join each year,” she said.

Few new members select their own investment plan, making revision of the GPF law necessary to help new members, said Ms Sikanya.

The life-path plan will adjust asset allocation depending on members’ age. For example, if a new GPF member is a young worker, it is better to invest in equities, which have a higher dividend yield than bonds or bank deposits, she said. The proportion in equities will reduce at the age of 49, while the portion of highly secured assets will increase.

Ms Sikanya said the life-path plan enables investment in equity of up to 65% of contributions.

The GPF is celebrating its 20th anniversary this year, and the average return since its inception is 6.57%.

At the end of August, the fund had net assets under management of 836 billion baht. The average return for the first eight months was 3.58%, above the inflation rate of 0.05% and the average deposit interest rate of 0.91%.