Thailand plans Japanese-style savings plan to support market
Investors would be able to allocate as much as 600,000 baht a year across a range of financial instruments under the proposed scheme
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[BANGKOK] Thailand is pulling out all the stops to channel idle household savings into long-term investments in stocks and bonds as a rapidly ageing population drives up pension liabilities and the cost of elderly care.
Thai investors would be able to allocate as much as 600,000 baht (US$17,822) a year across a range of financial instruments, including equities, fixed-income securities and investment funds, under the proposed scheme known as Thailand Individual Savings Account (TISA), according to the Securities and Exchange Commission.
Modelled after Japan’s Nippon Individual Savings Account, or NISA, the accounts are aimed at encouraging households to shift to goal-based long-term investment from savings that are held mostly in bank deposits and earning 2 per cent or less in interest.
The plan was first floated nearly a year ago when Thailand’s stock market ranked among the world’s worst performers as a prolonged period of political uncertainty led to an exodus of foreign investors.
“We are looking for ways to encourage households to convert savings into investments through tax incentives,” Pornanong Budsaratragoon, secretary-general of the Securities and Exchange Commission, said in an interview. “It’s also a way to help address the growing retirement and pension gap, which is becoming more urgent as societies age more rapidly.”
The initiative comes as Thailand, with one of Asia’s fastest-ageing populations, grapples with rising elderly care costs and pension obligations. Officials believe encouraging more people to invest for the long term can help improve retirement security while channeling more domestic savings into the country’s capital markets.
Thailand currently offers tax incentives to individuals investing in government-approved retirement mutual funds and long-term savings funds. Such funds hold an estimated 725 billion baht, according to the Association of Investment Management Companies.
TISA would mark the first time investors receive tax benefits for making direct investments in stocks and bonds. The scheme will replace existing tax-saving funds – introduced as short-term measures and frequently subjected to changes, Pornanong said.
The government is also considering accounts for children, which would be exempt from tax on interest, capital gains and dividend income, Pornanong noted. Parents could invest up to 200,000 baht a year for each child until they turn 20, encouraging long-term savings from an early age, she added. BLOOMBERG
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