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Thai Government Approves Mandatory Provident Fund
– Are Employers in Thailand Ready?


February 7, 2017

As demographic pressures build, the Royal Thai Government has taken a series of initiatives over recent years to encourage long-term savings for old age employees. Recently, the Thai cabinet has approved, in principle, a Mandatory Provident Fund system starting in 2018.


As demographic pressures build, the Royal Thai Government has taken a series of initiatives over recent years to encourage long-term savings for old age for both public and private sector employees. However, to ensure sufficient savings for future retirees, it is recognised that for some, more meaningful measures are needed. To that end, the Thai cabinet has recently approved, in principle, a Mandatory Provident Fund system starting in 2018. The details of how this will work are still unclear at this time and it will take some time for Parliament to consider and finalise the law changes. 

According to data published by the World Bank in 2016, it is expected that approximately 25% of the Thai population will reach 65 years of age or more by 2040. This leads Thailand to be one of the fastest ageing nations in Asia. With the growing old-age population, the proposed Mandatory Provident Fund will help the Thai government to minimise its cost towards the elderly, while encouraging working class citizens to increase their post-retirement savings, and potentially strengthening Thailand’s economy through increased investment into the capital market.

Proposed Design for the Mandatory Provident Fund

Under the proposed Mandatory Provident Fund regime, both the employer and the employee will be required to contribute starting from 3% of salary each, and to increase the contribution to 10% by the tenth year. The contributions are proposed to be paid based on salary capped at THB 60,000 (approximately USD 1,714) per month. However, the employer will be the sole contributor for employees earning less than THB 10,000 (approximately USD 286) per month. We understand that this Mandatory Provident Fund will be managed by a government-controlled organisation; however, details on who will manage the investments are still to be confirmed.

According to the Fiscal Policy Office, the government plan to first impose the Mandatory Provident Fund scheme to companies with 100 or more employees next year, and then gradually roll out to all companies by the seventh year of implementation.

We expect the proposed Mandatory Provident Fund will underpin private provident fund schemes, therefore, companies with an existing private funds may not need to additionally introduce the proposed Mandatory Provident Fund.

Implications for Employers

  1. Current Provident Fund Design

    It would be advisable for employers with an existing Provident Fund scheme to review their current contribution structure. In particular, employers can perform cost analysis to understand the impact, should the government increase the minimum provident fund contribution rate from 2% to 3% for privately-run funds. This would also be a sensible time for employers to take a wider look at their provident funds in terms of overall design and investment strategy, to ensure they remain aligned to their strategic goals.
  2. Plan Conversions from Defined Benefit to Defined Contribution

    Many companies in Thailand still operate defined benefit (DB) plans, which means the cost to company remains unknown until the final benefit is paid, when the employee leaves. As the proposed Mandatory Provident Fund is designed as a defined contribution (DC) plan, employers should consider their existing plan design and assess if modifications should be made to mitigate the risk of rising costs.
    Furthermore, like many government bodies and private corporations around the world, companies in Thailand continue to consider whether they should transition their DB plans to a DC design. This may be the right time to consider this if not done so already.

    Converting to a DC plan can help companies remove, or reduce, the burden of having to hold long-term liabilities on their books of accounts, allow companies to manage their P&L with greater predictability and mitigate the company’s long-term risks in terms of salary inflation and investment returns.
  3. Future Implementation of the Mandatory Provident Fund
    We assume that companies that do not have an existing provident fund will need to implement the new Mandatory Provident Fund, while companies that do will not.
    While there is limited information available to what the implementation of the Mandatory Provident Fund will involve, companies will soon need to consider reviewing its current retirement benefit schemes, funding vehicles, administration, compliance and governance.

Our Observation

There remains a considerable amount of uncertainty on the details of the Mandatory Provident Fund, however it is important for employers in Thailand to be aware of the proposed changes and the potential impact they might have on their benefit plans and cost to company.

Based on Willis Towers Watson’s 2015/2016 Global Benefits Attitudes Survey, 43% of employees in the Asia Pacific region are concerned about their financial future; something that we often hear voiced in Thailand as well. The government’s intention is a good step forward to further supporting retirement savings. It will also provide employers with an opportunity to review their existing arrangements and adequacy to support employees’ long-term financial needs.

We will keep you updated on latest developments over the coming months, including market insights we gather as more information becomes available.

This was written by Willis Towers Watson Thailand - Retirement

If you need more information or would like to contact Willis Towers Watson Thailand Retirement, please email

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