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Viewpoints Q&A: Thailand’s National Pension Fund (Mandatory Provident Fund)

Health and Benefits|Retirement
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July 9, 2021

Thailand’s cabinet has now approved in principle a “National Pension Fund” (NPF) in March 2021, which is expected to take effect in the next few years.

Thailand has been regarded as an “ageing” society since 2005 and our Thai Government has taken a series of initiatives over the years to respond to this challenge. Recently, the Thai cabinet has approved, in principle, a Mandatory Provident Fund or “National Pension Fund”, a major step towards enactment. This act has raised many questions among employers and employees alike on what it is and what needs to be prepared once the law finally takes effect.

In our latest #HeRoMission webinar series – “Mission to the Future: Investing in employees’ WEALTHness”, the topic was put into the spotlight and discussed in great length. We have collected the most frequently asked questions from our attendees on this NPF and have our local team of experts provided answers to each of the selected questions below.

Q – “If our company already provides provident fund, do we still need NPF?”

A – In general, if company already has a provident fund, NPF will not be needed anymore. If there are employees not participating in the Company’s PF, those employees need to be included in the NPF. If contribution rates of existing PF is not yet aligned in the required contribution under NPF, plan rules of the PF needs to be amended to be at least in line with the NPF’s contribution rates.

Q – “Nowadays, PF allows member to leave the fund, unless 1-year and can come back to apply for membership. After NPF, do we need to change PF rules to restrict member from leaving?”

A – The guidance on this is still vague as the proposed mandatory provident fund only mention that all employees should be either part of the Company’s PF or the NPF. We can only get a clearer answer to this when the implementing rules for the NPF are finalized.

Q – “I want to know who would be the fund manager? And if company already provides PF, do we need to submit contribution separately to NPF? And do we need to cancel the existing PF?”

A – The fund manager of the NPF will be selected by the NPF Committee.

In general, if company already has a provident fund, NPF will not be needed anymore. If there are employees not participating in the Company’s PF, those employees need to be included in the NPF. If contribution rates of existing PF is not yet aligned in the required contribution under NPF, plan rules of the PF needs to be amended to be at least in line with the NPF’s contribution rates.

Q – “If employers provide PF and contribute 5-10%, then we no longer need NPF, right? Thank you.”

A – As long as the contribution rates are at least in line with the NPF contribution rates then no need to revisit existing plan rules. Please refer to below table:

National Pension Fund’s Contribution Rate

Different contribution rates according to years of NPF law enforcement
Year of Law enforcement Employee and employer's contribution (per month)
1 – 3 3% of monthly salary
4 – 6 5% of monthly salary
7– 9 7% of monthly salary
10 onwards 10% of monthly salary

Although the details of NPF draft and the timeline of enactment remain uncertain, it is critical for employers to be aware of the proposed changes and their potential impact on benefit plans and costs. Once it takes effect, the NPF would bring about the most substantive change to the Thai retirement system and pension market in a generation. Discussion and debate around the proposal 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.

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