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Set Up a Provident Fund


To set up a provident fund, six necessary steps must be taken in the following order: 
 1. Campaign for Prospective Members
2. Election and Appointment of Fund Committee
          3. Selection and Appointment of Management Company
4. Signing Contract with the Appointed Management Company
5. Fund Registration 
6. Fund Management and Reports


      1. Campaign for Prospective Members
Setting up a provident fund requires, first of all, mutual cooperation between the employer and its employees. While the former facilitates knowledge enhancement and better understanding, the latter or potential fund members should study their own savings patterns in parallel with the rights and benefits, particularly tax incentives, of provident fund investment.


       Campaigning for a provident fund can come in any flexible formats that suit employees’ characteristics. Many common approaches such as printed materials, seminars and Q&A sessions regarding the importance and mechanism of the provident fund, help to elevate employees’ awareness of retirement savings.


         2. Election and Appointment of Fund Committee 

Once the employer and the employees implant a mutual understanding of provident fund, they should be ready to reach an agreement to establish one that will best serve both parties. The next preliminary step is to appoint a fund committee to supervise the fund management. Under the Provident Fund Act B.E. 2530, the fund committee must comprise representatives elected by the employees and those appointed by the employer.


      3. Selection and Appointment of Management Company

The fund committee is authorized to appoint a management company. The committee is recommended to go through a selection process before making a final decision. To view selection criteria, please refer to selecting an asset management company.


          Other professional service providers will also be engaged in fund management to comply with the mandate that provident fund assets must be segregated from those of the employer’s and the appointed management company’s. Such qualified service providers, i.e., “custodian” and “auditor” must obtain a license to perform their respective tasks from the Office of the Securities and Exchange Commission (SEC). The custodian has duties to take custody and ensure safekeeping of provident fund assets. The auditor has duties to audit and verify fund financial reports. In addition, the management company may delegate administrative duties to “fund administrator” whose duties include collecting contribution, registering members and disseminating semi-annual statements to members.


      4. Signing Contract with the Appointed Management Company

The duration of a management contract should be long enough to accommodate a provident fund’s purpose of long-term investments for retirement savings. In addition, frequent changes of management companies should be avoided as they may result in discontinuance of investment policies and mismanagement of assets/liabilities, which will lead to short-term benefits and possibly unachieved long-term goals. The current regulation requires a minimum management term of at least two years.


          Before signing a management contract, the fund committee should be cautious to protect the best interest of the fund members.


      5. Fund Registration

A contracted management company should act as a coordinator for the execution of fund registration or fund article amendment. There are two forms of provident funds as follows:
          1) Single Fund: One provident fund for one employer whose fund size is relatively large.
          2) Pooled Fund: One provident fund for multiple employers whose fund size ranges from small-to medium-sized.
               A pooled fund article consists of two parts, i.e., general conditions for all employers and specific conditions for
               individual employers.


      6. Fund Management and Reports

 * Contribution remittance and member records

                Employer may assign the personnel department or the finance department to take responsibility for member records for contribution collection. Employer is bound to remit contributions into the fund within three business days after the date of wage payment. A violation would result in a monthly surcharge of 5% of the delayed amounts.


   * Investment

               Contributions remitted to the fund will be managed by one or more management companies under the supervision of the fund committee to ensure that the fund manager will invest in accordance with the fund management contract. The SEC has also extended the concept of “employee’s choice” to provide members with an opportunity to choose an investment policy that best suits their own risk tolerance and return expectations. Nevertheless, whether or not this concept can be successfully implemented depends on the members’ awareness and understanding of capital market investment.


   * NAV Calculation

                The net asset value (NAV) of the fund is calculated upon the mark-to-market (MTM) practice. Market prices of different assets in the portfolio such as stocks and bonds determine the fair value of fund assets. The fund committee and the management company agree on the frequency of trade dates that must take place at least once a week. The NAV – initially assessed by the management company – is updated upon a specified trade date and verified by an NAV verifier to ensure accuracy.   


   * Reports

                The management company provides the fund committee with monthly and annual reports on the investment portfolio and returns. Members receive semi-annual statements of their contributions and benefits. Members’ queries concerning the fund management can be made through the fund committee.





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Last update : June 22, 2006

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