Thai GPF expands into annuities and insurance

The Government Pension Fund of Thailand is planning strategic acquisitions to become a full-service pensions provider.

The $6 billion Government Pension Fund (GPF) of Thailand, which now manages retirement schemes for civil servants, is about to launch a new, wholly owned annuities business as well as acquire a stake in a global life insurance company in order to become a full-service pensions provider to the entire nation, says Visit Tantisunthorn, secretary general.

These moves go hand-in-hand with the GPF's effort to amend its founding GPF Act to allow it to introduce member's choice (a topic explored in the August/September edition of AsianInvestor magazine). The legislation has been approved by the government and is now in parliament. In the meantime, the Securities and Exchange Commission of Thailand has granted the GPF an asset management license that will allow it to provide annuities and other asset management products.

The GPF will initially target members of local government provident funds, which remain outside the GPF's remit, and then the broader retail market. Visit says the GPF will partner with a government-owned bank for distribution purposes, particularly for rural areas. He would not name the bank, but says it will be one without its own asset management business. The GPF will target elderly workers with simple fixed annuity products first, but also wants to develop a range of products.

Visit acknowledges this move could hinder the private asset management sector. "Yes, there could be crowding out," he says. But he also adds that no private-sector firms are currently providing annuities, and that the GPF is filling a gap. He expects this initiative to begin operations around March, assuming the legislature passes the amendments to the GPF Act on time. He says while he is overseeing the project, the GPF will need to hire professionals from outside to manage the new business professionally.

The GPF is also in talks with a foreign life insurance company to take a stake in its Thai operations, in order to have a full array of retirement and saving products at hand. He would not name the organization but says an announcement should be due by the end of the year.

These developments are certain to frighten the Thai asset management and pensions industry, which has been keen to see Thailand adopt a retirement system more like Hong Kong's Mandatory Provident Fund, which is based around competition, rather than a centralized regime. But Visit believes that only the GPF is in a position to provide low-cost, comprehensive service to the whole of Thailand.