Trouble at Thailand's Government Pension Fund
Thailand's Public Sector Anti Corruption Commission (PACC) has asked former Government Pension Fund (GPF) secretary-general, Visit Tantisunthorn, to clarify by June 15 alleged irregularities in the management of the fund during his tenure. The GPF manages around Bt400 billion ($11.8 billion) in assets for about 1.2 million civil servants in Thailand.
Visit resigned from his post on June 2 amid the allegations of management irregularities, including one case of alleged insider trading by fund executives. Instead of accepting his resignation, the GPF board terminated his employment contract. The GPF has since assigned a recruitment panel, chaired by Civil Service Commission secretary-general Preecha Vajrabhaya, to find Visit's replacement.
Among the alleged irregularities cited by PACC was the creation of a sub-committee to manage part of the GPF's portfolio. Under the law, the GPF board has the authority to decide on the fund's investment strategies and allocations.
In its preliminary findings, PACC has blamed the alleged management irregularities for the portfolio losses incurred by the GPF in 2007, estimated at between Bt18 billion ($529 million) to Bt24 billion ($706 million) in 2007.
In light of the troubles, finance minister Korn Chatikavanij has directed the GPF board to review the fund's rules and regulations, in a bid to restore the public's confidence in the fund.
The controversy at the GPF comes at a time when the fund has actually recorded an improvement on last year's dismal performance. The fund posted an investment return of nearly Bt10 billion ($294 million) in the January to May period, compared with a loss of Bt4.21 billion ($124 million) in 2008, thanks in large part to the recovery in financial markets locally and worldwide.
The GPF was created 12 years ago to better serve the retirement needs of Thailand's civil servants and to ease the government's fiscal burden of funding retirement benefits. Civil servants who joined before March 27, 1997 do not contribute monthly to the fund; they get as their benefit 100% of their last salary every month after they retire at the age of 60. Civil servants who joined after the cut-off date contribute 3% of their salary monthly to the pension fund, and that amount that is matched by their employer; they get as their benefit 70% of their last salary every month after they retire at the age of 60 plus the value of their and their employer's pension contributions.
As of end May, 75% of the GPF's portfolio was in Thai fixed-income, 7.3% in Thai equities, 5.8% in foreign equity, 4.7% in foreign fixed income, 4.1% in property, and 3.5% in alternative investments.
The GPF's net rate of return to its members was 9.22% in 2007. In 2008, the figure was a 5.12% loss.
The GPF doesn't have annual liabilities because the funding comes from the government. The objective is to outperform the 12-year average inflation. The average age of GPF's members is 48 years, so on average, they will retire in 12 years' time.