Investment in stocks through provident funds (PVDs) makes up 10-15% of the total asset class, generating low returns and causing fund members to have insufficient savings for retirement, says the Securities and Exchange Commission (SEC).
“Saving for retirement is very important and investment in provident funds should generate a higher return to match higher expenses after retirement,” said SEC secretary-general Nataya Niyamanusorn.
Mrs Nataya said people should invest at least 30-40% of their portfolio in stocks to achieve the benefits of long-term investment. Novice investors can study the Stock Exchange of Thailand or SEC websites, or consult with investment consultants.
Equity generates the highest returns in the long run for asset classes, so provident funds should select quality stocks for long-term investment and hand-pick high dividend stocks generating a greater return than deposit interest rates, she said.
Studies have found most provident funds invest in low-risk assets such as bank deposits and government bonds, which generate low returns.
Factors causing provident funds to select underweight stocks are members not understanding stock investment, provident fund managers having no investment skills and investment choices being made by funds limited to certain asset classes, said Mrs Nataya.
She said some provident fund members still do not know they can continue investing in the funds after retirement or opt to select other investment options such as retirement mutual funds.
Thailand will fully become an ageing society over the next decade, with 2019 the first year the elderly comprise 18% of the population. The elderly are projected to rise to 20% and 28% of the total population in 2020 and 2030, respectively.
“Bank of Thailand statistics show Thais have too much debt, some 78.4% of GDP as of June 30, a slight decrease from 79.9% at the end of 2016. Siam Commercial Bank figures show Thais have low savings expenses after retirement, and they start saving for retirement from 41-50, making their evaluation of such expenses lower than expected,” said Mrs Nataya.
“Some 71% of ageing people have no savings for retirement,” she said.
The SEC estimates that between the ages of 60-80 for retired people, those who spend 500 baht per day will need to have savings worth 3.6 million baht.
Total net asset value of mutual funds, meanwhile, have augmented from 2.28 trillion baht in 2012 to 4.45 trillion at the end of June 2017, up 1.95 times, according to the SEC.
The number of unitholders has also increased from 3.55 million accounts in 2012 to 5.39 million accounts at present — a rise of 1.51 times.
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