Provident fund is a form of investment featuring contractual savings voluntarily made by savers in the working age who have saving capability. The fund objective is to provide security to the members when they retire from their work so that they would not be a burden to their families, society or the government. It can be regarded as a today saving for tomorrow living.
The first establishment of provident fund in Thailand dated back before 1984. The Ministry of Finance issued a Ministerial Notification no. 162 and the Provident Fund Act B.E. 2530 (1987) was promulgated to promote and encourage private entities’ establishment of provident funds as part of employee welfare. Contributions to each provident fund comprise that made by employees of their own accord called “employee’s contribution” and that made willingly by the respective employer called “employer’s contribution.” In view of this, provident fund is a fund jointly and voluntarily set up by the employees and their employer to make savings through the fund.
Provident fund benefits
1.Post-retirement security: The fund serves as a long-run welfare for employees, with the employer helping its employees make substantial savings, hence a security for the employees after leaving or retiring from their work. This can be an incentive for the employees, leading to their lifelong service and lower turnovers.
2. Relief of financial management burden of employer and employee: A fund management company is in direct charge of fund management, and keeps abreast of all the latest developments that would affect the fund investment. With professionalism and expertise in this area, it can better manage the savings than management by the employer itself.
3. Reduction of tax burden: Contributions made by the employees and the employer to the fund can be used for tax reduction in the fiscal year when the saving is made.
4. Social benefits: The fund is a type of saving that can be used for investments in various types of securities, thus contributing to national development involving both business sectors and infrastructure projects.
Main composition of a provident fund (“the fund”)
1.The fund is contribution made by the employees (“employee’s contribution”) and by their employer (“employer’s contribution”), together with the benefit or earning from the management of which throughout the period of each employee’s membership of the fund until his/her retirement or termination of membership. Fund capital may also come partly from donation.
2. Fund member is an individual employee with qualifications pursuant to the fund regulations and applying as a member of the fund.
3. Fund regulations refer to the regulations with which the employees and the employer are obliged to complyin such respects as application for membership, termination of membership, contribution rates, and fund contribution conditions, etc.
4. Fund committee is composed of elected persons from employees on one side and appointed persons from the employer on the other side to represent all the fund members in supervising the general affairs of the fund, and selecting as well as appointing third parties to perform duties for the fund, such as asset management company, custodian and auditor, with whom the fund committee will coordinate in relation to the fund affairs.
5. Third parties comprise a asset management company, which is appointed by the employer as the fund manager (approved by the registrar) to perform duty in the purview of the relevant law, as the employer is not permitted by the law to manage its own fund; a custodian (approved by the registrar) to take custody of the fund assets, and an auditor to examine the fund account book.
6. Fund registrar currently is Office of the Securities and Exchange Commission, generally known as “SEC”. SEC is an independent body in charge of supervision and monitoring of provident fund business, overseeing the undertakings by various service providers in the industry and imposing regulations and criteria in relation to the fund. All provident funds are required by the law to register with SEC to earn the juristic entity status. |
