Individual Choice in Arrangement Case of Thailand

Visit Tantisunthorn Government Pension Fund, Thailand 27 April 2005

1 Table of Content

ƒ GPF ƒ Why investment choice? ƒ Member’s needs ƒ Type of choices ƒ Characteristics ƒ Sample of choices ƒ Education

2 Government Pension Fund

ƒ Established in 1997 ƒ Defined contribution ƒ 1.16 million members ƒ Single Pooled-fund of $6.3 billion

3 Government Pension Fund

ƒ At least 60% in low-risk asset ƒ 20% limit on , & convertible debenture ƒ 10% limit on single company's stock, warrant & debenture ƒ Low risk asset • / deposit • Government • Bank's instrument • Investment grade bond • Securitized bond ƒ High risk asset • Stock & warrant • Corporate debenture • Mutual fund • Real estate • Other securities

4 Investment Policy Statement

ƒ Philosophy & objective ƒ Portfolio constructing ƒ Investment guideline ƒ Control mechanism

5 Asset Allocation

100

90 80

70 60 50 40 30

20 10 0 Planned Actual

Alternative 32 Real Estate 53 Equity 12 14 80 81

6 Amending Act & Regulations

ƒ Foreign investment ƒ Subsidiary/affiliate ƒ Member investment choice ƒ Voluntary additional contribution ƒ Annuity/periodic payment

7 Why investment choices?

ƒ Global direction ƒ Risk & return profile ƒ Education has improved ƒ Opportunity available ƒ Size of fund : affordable

8 GPF Survey

ƒ Objective • Determine member’s in individual investment plan • Explore member’s understanding of investment philosophy

9 GPF Survey

ƒ Result • 54% are interested in individual investment plan and would like to have the to choose • 21% are familiar with equity investment, even more percentage are familiar with bond product • 89% are aware that equity is riskier than bond or deposit

10 Conclusion

ƒ Members express their needs in having choices ƒ Education in investment related subject are utmost essential ƒ Limitation on how much a member can put in choice should be posted ƒ Number of choices should be limited at the beginning

11 Age-based Investment Choices

ƒ Different asset allocation to suit different age group ƒ Automatically shift asset allocation toward more conservative ƒ Choices are voluntary

12 How much can be put in choices?

ƒ Employer & Employee contributions are fully vested ƒ By law, the two can be put in choices suit members’ risk appetite ƒ In the first stage, employee’s contribution and voluntary saving are at their discretion

13 What choices look like?

ƒ 3-5 choices will be offered, including one with less risky than current plan ƒ Employee’s contribution and voluntary saving can be in different choice ƒ Member can switch choice once a year

14 Sample of Choices

Retirement Year 2050 2040 2030 2020 2010 Age <26 26-35 36-45 46-55 >55

Allocation Equity 60% 45% 30% 15% 30% Fixed-Income 40% 55% 70% 85% 97%

Current Plan

15 Age-Based Asset Allocation Return 2590 2580

2570 2560

2550

Time to retirement Long

Risk 16 Education

Transition To introduce the concept of investment choices

Initial To inform and educate member regarding the options

Ongoing To expand knowledge

17 Education material

Train the trainer On-site visit Books Member Articles

Internet About GPF E-learning Financial Projection Inquiries

Contact Center IVR Telephone Call Inquiries E-mail Forms Letter SMS

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