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Provident Fund
Provident fund ("the fund") is a fund set up voluntarily between the employer and employees. Assets of the fund consist of money contributed by both employer and employees in the rate of 2-15% of basic salary depending on provident fund’s articles which registered with the Securities and Exchange Commission (SEC), the registrar and supervisor.
Provident fund not only provides a tool for employees to save with the employer’s assistance, assets of the fund are further managed by a professional fund management called "Asset Management Company (AMC)." The benefits derived from management are distributed to members of the fund proportionately.
Member’s savings could grow over time on account of the monthly contributions from both employer and employee, plus assets derived from investments or interests incurred from assets of the fund. However, interests and dividends from investments will not be paid to fund members before membership termination since the purpose of setting up the fund is to accumulate the savings into a large amount with the intention to assure a quality life after retirement. Moreover, members are not entitled to withdraw part of the savings before termination of membership since it is not consistent with the objective of saving for retirement.
The employer can set the vesting scheme of accumulated employer contribution and its earning according to years of employment or years of provident fund membership. Therefore, setting up of a provident fund can be regarded as a kind of benefit so as to motivate employees to work with the employer.
Upon termination of membership, members will receive all of their savings and its incurred benefits, as well as a certain amount of employer's contribution and its incurred benefits according to the fund’s articles. In case of resignation, member can choose to temporarily keep their money within the former fund before transferring it to the provident fund of his/her new employer or the Retirement Mutual Fund (RMF). This will allow members to maintain their retirement savings in the system.
Provident Fund Investment
To set up provident fund, AMC will require information from the employer and the employees with regards to experience with investment asset, investment obligations, average age of employees to see investment time horizon, risk tolerance levels, and desired levels of returns (Customer’s Profile). AMC will analyze Customer’s Profiles to propose appropriate investment plan for the employees (Suitability). Fund Committee together with AMC will design suitable investment plans for employees.
Provident fund investment must be under the regulations of the Securities and Exchange Commission (SEC), fund registrar and supervisor. Nowadays employee’s choice is provided for employees. In order to know their investment objectives and acceptable risk level, the employees need to fill in “Member Risk Profile” to evaluate themselves and select the suitable investment plan. Otherwise, they can join “Target Date” Fund which a series fund over time and portfolio becomes increasingly conservative as it nears the target retirement date.
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Provident Fund Benefits
Employer
Employee
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Provident Fund Type under Principal’s Management
Single Fund - established by the sole employer or many employers which are affiliated companies. There are two types of Single Fund:
Pooled Fund - established by AMC for small companies to share all the fixed costs (economy of scale). There are three types of Pooled Fund
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Principal Asset Management Company Limited sets up an innovation fund named “The Registered Provident Fund of Principal Target Date Retirement” which is master-sub pooled fund with Target Date platform and Target Risk platform which are able to satisfy both provident fund member who believes in life cycle portfolio and who is very keen on investment and would like to select investment plan that matches his/her risk tolerance level.
Problems that provident fund member faces presently
• Longevity of Thai population, then bigger lump sum for retirement is needed.
• Most provident fund members invest in very conservative investment plan which the low rate of return is unable to create enough wealth for expenses after retirement.
• Provident fund member who has little knowledge about investment is unable to select the suitable investment plan or switches the investment plan in the wrong timing.
• Employer does not provide Employee’s choice for employees or the Employee’s choice is provided with limited investment plans.
• The investment plans provided for employees are really not suitable for them.
Target Date
Target Date funds have become very popular among those who are saving for retirement. They are based on the simple premise that the younger the investor, the longer the time horizon he or she has and the greater the risk he or she can take to potentially increase returns. A young investor's portfolio, for example, should contain mostly equities. In contrast, an older investor would hold a more conservative portfolio, with fewer equities and more fixed-income investments.
Benefits for members
• No uncertainty – to select the suitable investment plan
• No confusion – to switch the investment plan
• No complication
How to select the investment Plan
• Member selects the investment plan only once.
• Fund manager adjusts the portfolio risk by member’s age.
This fund is designed to meet the needs of member that wants an investment option suited to the his/her particular investment time horizon and that tends to be more accepting of risk in the early years of his or her time horizon and becomes more risk-averse as he or she nears the retirement.
The investment objective of this fund is to seek a total return consisting of long-term growth of capital and current income consistent with the investment strategy of member who expects to retire in the year identified.
Target date Glide Path
A glide path is a representation of how we manage a series over time and how it becomes increasingly conservative as it nears the target date.
Besides Target Date, we have Target Risk that member can select conservative, balance or growth plan that matches their risk appetite. Member is able to set his/her own asset allocation by using Do-it-yourself plan and mix between these sub funds.
There are 8 sub funds that can be separated into 4 groups of asset as follows:
Fixed Income
1. Short-term Fixed Income (TR_iDAILY)
This sub fund has a policy to invest in deposits, government debt securities, financial sector debt instruments, and private debt instruments both onshore and offshore which the maturity term ≤ 397 days since the date of investment.
2. Fixed Income (TR_iFIXED)
This sub fund has a policy to invest in or hold debt instruments, financial instruments and/or deposits offered for sale both onshore and offshore issued by government sector, state enterprises, financial institutions and/or private sectors that have received credit ratings from institutions of credit rating that have been accepted by SEC which has the Issue Rating or Issuer Rating in the investment grade.
Thai Equity
1. Thai Equity (TR_TEQ)
This sub fund has a policy to invest in equity instruments with good fundamentals or related to a business or industry that is important to the national economy or is an industrial business that is supported or has the opportunity to receive good results from government policies or have growth potential in line with economic conditions
2. Thai Equity (TR_TDIF)
This sub fund has a policy to invest in or hold equity/stocks of listed companies in the Stock Exchange of Thailand or the Market for Alternative Investment (mai) with good fundamentals and growth prospects or companies that have a good dividend payment history.
3. Thai Equity (TR_SET50)
This sub fund has a policy to generate returns of the Fund in accordance with the SET50 Index movement by investing in or holding stocks registered in the Stock Exchange which are parts of the SET50 Index.
Global Equity
1. Global Equity (TR_GEQ)
This sub fund has a policy to invest in or holding in investment units of foreign equity funds and/or Exchange Traded Fund (ETF) that has a policy to invest in foreign equity. The fund can be invested in various regions, country or sectors according to the discretion of fund manager.
2. Global Equity (TR_GOPP)
This sub fund has a policy to invest in or hold the investment units of only one foreign fund, Morgan Stanley Investment Funds Global Opportunity Fund (master fund).
Alternative investment
1. Property Fund (TR_iPROP)
This sub fund has a policy to invest in in securities or financial instruments in the property sector for both onshore and offshore. The fund will mainly invest in unit trust of Property Funds that listed on the Stock Exchange or unit trust or Real Estate Investment Trusts (REITs) (Property Fund), Exchange Traded Fund that focus on investment in instruments of Property funds (REITs ETF), unit of Infrastructure Fund which is in the Property Sector (Infrastructure Fund), private equity units that focus on investing in real estate or securities or instruments related to the real estate industry (Private Equity Fund).
How to join The Registered Provident Fund of Principal Target Date Retirement
• Fund Committee together with Principal consider the suitable plans for members by setting up Target Date or Target Risk or both platforms
• Principal arranges Educational session for members how to select the suitable investment plan
• Employer’s payroll/HR pays the monthly contribution with only one cheque or one pay-in for all the plans members select.
• Specific the selected investment plans in the text file/excel file only first time
• Principal allocated the contribution to each sub fund with our high efficiency registrar system
• Principal provides online service via web site and mobile application. Members can do the retirement plan via our Plan WISE Retire WELL program
Online Service for Member
Transaction
• Switch investment policy
• Investment plan of lump sum and monthly contribution can be designed differently
• Change the contribution rate
Fund Information
• Main fund’s articles
• Kor Chor 1.2 (Investment Details)
Company Information
• Fund’s articles in the part of each employer
• YTD return by Sub Fund and Menu
• Fund Committee name list
Risk Profile Questionnaire
• Member Risk Profile to evaluate risk acceptance level
Enquiry & Report
• Contribution payment history report
• Investment plan switching report
• Individual statement as at end of June and December
Retirement Planning Tool
• Plan WISE Retire WELL