Although provident funds (PVD) are a key tool for salaried workers to build financial security for retirement, many people exhibit a "choose and forget" behavior.
They select an investment plan once at enrollment and never review or adjust their investment allocations throughout their working life. This issue can lead to portfolios that no longer suit their age or evolving risk tolerance over time.
Moreover, in an era where Thais are living longer and face ongoing challenges from inflation and rising living costs, simply choosing a suitable investment plan at the start is no longer sufficient.
Recently, Kasikorn Asset Management Company Limited (KAsset) launched the Life Path Solution, an investment management concept for retirement that automatically adjusts provident fund asset allocations by age—from early working years to retirement—to ensure portfolios align better with individual goals and risk levels throughout life stages.
Data from KAsset shows that Thailand has officially entered an aging society, with average life expectancy of 72 years for men and 80 years for women, reflecting increasing longevity. However, financial conditions have not kept pace.
While more than 55.4% of elderly Thais have savings, over 64% of them hold less than 100,000 baht, and only 1% have savings exceeding 3 million baht.
Additionally, many Thais have limited emergency funds: 48% have enough savings for less than one month of expenses, and only 7% can cover more than six months.
Another challenge for retirement planning is rising health costs with age. In 2021, those aged 60 and over spent an average of 35,567 baht annually on health, more than double the 17,235 baht average spent by the 25-59 age group.
At the same time, health-related inflation is increasing by about 1.3% per year, reducing money's purchasing power long-term. In other words, expenses of 10,000 baht per month today would require about 14,730 baht per month in 30 years to maintain the same buying power.
A key tool for salaried workers to build systematic retirement savings is the provident fund, where employees and employers contribute monthly, and the funds are invested to generate long-term returns.
Woranan Kusolpat, Assistant Managing Director of Kasikorn Asset Management Company Limited, said that currently more than 75% of Thai provident fund portfolios are concentrated in domestic deposits and bonds.
Although these carry low risk, their long-term returns are limited. Investing only in Thai stocks or bonds alone is also an incomplete diversification.
"A suitable portfolio should diversify across various global asset classes, including technology and AI stocks, healthcare stocks, and gold, to increase return opportunities and reduce risk from overreliance on any single asset,"
Woranan added that no asset class consistently outperforms every year worldwide. Therefore, a diversified portfolio, while not always the top performer, tends to deliver steadier returns over time.
Historical data over the past 10 years shows such portfolios can achieve average annual returns of about 8%, maintaining volatility at appropriate levels.
Another problem is that most provident fund members select their investment plan once at enrollment and never adjust their portfolios throughout their working life, with statistics showing over 90% fall into this category.
Therefore, KAsset developed the Life Path Solution, an investment management concept that automatically adjusts asset allocations according to members’ age.
Win Prompat, CFA, CEO of Kasikorn Asset Management Company Limited, explained that the Life Path Solution manages retirement investments by automatically adjusting asset allocations based on the member's age.
Members choose their investment plan once, and the system gradually adjusts the portfolio to match their life stage. For example, at ages 25-45, approximately 85% of investments are in global equities, which then gradually reduce to about 61% risk assets by age 50, continuing to decrease as retirement nears.
Life Path Solution primarily invests in K-WealthPLUS Series funds, especially K-WPULTIMATE, which diversifies globally across multiple asset types and can adjust allocations among equities, bonds, and alternative assets depending on market conditions.
As of now, the K-WPULTIMATE fund has generated about 9% year-to-date returns, while also investing in Thai bond funds to help reduce overall portfolio volatility.
Kasikorn Asset Management has already introduced this service to some provident fund clients, resulting in a 54% increase in assets under management from participants, a 30% rise in members, and a 14% growth in participating companies.
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