Ministry seeks magic number for NPF

The Finance Ministry is making a final decision on how many fund managers should be sufficient for the National Pension Fund (NPF) to prevent the compulsory fund from shouldering too large a financial burden, taking a toll on its members’ contributions.

The ministry said up to five investment management companies are appropriate to manage the NPF, as too few would not allow it to compare their performances, while too many would cause the pension fund’s assets to be too broadly dispersed, said a source at the ministry.

But the Council of State, which is vetting the draft NPF Act, said the fund should be managed by fewer than five firms, as too many fund managers would raise costs, the source said.

After the issue is settled, the draft will be sent to the cabinet for approval before being forwarded to the National Legislative Assembly (NLA) for deliberation.

The draft bill is aimed at providing a retirement safety net to employees who are not covered by voluntary provident funds. There are 16 million people in the workforce, but only 3 million of them are enrolled in voluntary provident funds, with a combined fund size of 900 billion baht.

If the bill passes into law, all employees aged 15-60 (excluding those covered by voluntary provident funds) must contribute to the pension fund.

The bill would require employers and employees to make matching contributions of 3% of the employee’s salary to the fund for the first three years before increasing to 5% from the fourth to sixth year.

The rate increases to 7% from the seventh to ninth year and to 10% from year 10 onwards, with the base salary capped at 60,000 baht a month. The rise in contributions will also be subject to economic conditions.

Employers alone must contribute to the NPF in cases when employees earn 10,000 baht a month or less. Those whose monthly salary is no more than 10,000 baht account for half of the total workforce.

The law will require companies with at least 100 employees, those with Board of Investment tax privileges, concessionaires, listed firms and state enterprises to match employees’ contributions to the fund within the first year of enforcement.

Companies with at least 10 employees will have to offer compulsory retirement savings from the fourth year of implementation, and those with only one employee must contribute from the sixth year.

In cases where companies contribute less than the mandatory pension fund requirement, they are required to at least match the minimum mandatory contribution or switch their contributions to the NPF.

After the NLA passes the law, the Finance Ministry expects to take 1-2 years incorporating the mandatory fund and laying down the management system.