Thailand's success in reducing fertility levels in the past few decades has brought it an unavoidable consequence -- a rising ageing population. The sheer size demands state measures to enable Thailand to be better prepared for dealing with an ageing society.
Many Thai governments came up with pension schemes as solutions to this growing trend. However, they are too little too late, lacking the potential to sufficiently and effectively provide the elderly with safety nets for life after retirement.
Thailand is notorious for its inability to handle preventable problems ahead of time. Solutions to many key problems including the increasingly greying population have been long delayed, sometimes indefinitely. Governments and authorities usually deal with immediate problems when they are about to explode.
Wichit Chantanusornsiri is a senior economics reporter, Bangkok Post.
Thailand has not implemented timely solutions to deal with an ageing society; a status it reached in 2007. A society is considered to be ageing when one-tenth of its population is over 60 years of age, and to be aged when one-fifth of its population is over 60, according to the UN's definition.
With 14% of the population of 65 million currently aged over 60, the National Statistics Office estimates that the country will become an aged society by 2025.
Current and previous governments have plainly not adequately addressed this as part of their key priorities. If we remain complacent, this issue will soon become a time bomb waiting to wreck Thai society.
About 30 years ago, the then Chatichai Choonhavan government enacted the Social Security Fund (SSF) which includes a pension scheme for members who have made contributions for over 15 years. Those who do so will be entitled to a pension when they reach the retirement age of 55. The initiative was beneficial as it helped build a financial plan for members to be prepared for their retirement. But the SSF itself is not sustainable. Both the International Labour Organisation and Ministry of Finance predict that the fund will run out of money within the next 20 years as pensioners started to receive payouts back in 2014.
The SSF, with 11.5 million members, has also failed to introduce payouts that match increased costs of living and inflation. It gives pension payouts which are unrealistic given current economic realities and are thus inadequate for the elderly. For example, a retired member receives a monthly payout of 3,000-6,000 baht. Many studies indicate this amount is insufficient for retirees to have a decent life. In principle, SSF members should receive a payment of at least 40-50% of their last salary.
The National Savings Fund (NSF), the brainchild of the Democrat Party when Korn Chatikavanij was finance minister, was implemented by the current government last year. It is a pension plan for informal workers such as those who are self-employed, farmers and freelancers accounting for a group of about 18 million people out of a total 34 million in the labour market.
Even though the NSF is a good initiative that provides security for those who were previously excluded from other pension funds, pension payouts remain too low.
For example, the fund is available to those aged 15-60 with a maximum contribution of 1,000 baht per month. If a person starts his or her contributions today at the age of 15, the member will be entitled to a pension of 6,752 baht a month upon reaching 60. When we factor in inflation in the next 20 or 30 years, this amount is wholly inadequate. Currently, there are 27 million informal workers including those who are in and outside of the labour market as well as the unemployed. It is estimated that 89% of them do not have a pension plan.
The Ministry of Finance has also been developing an idea to set up a National Pension Fund that will enforce the long-delayed mandatory provident fund scheme for salaried employees in the private sector. Employers with 100 employees or more will be required to match employees' contributions to the fund.
Currently, Thailand applies a voluntary model for its existing 424 provident funds that serve 2.9 million members. The proposal, spearheaded by Finance Minister Apisak Tantivorawong, has faced opposition from employers who are already struggling amid the economic slowdown.
The government, however, must go ahead with the mandatory provident fund plan. The excuse often heard is not valid given some favourable tax measures that were implemented by this government to ease the burden for employers, not to mention that contributions to the fund can be used to deduct tax payments.
In sum, the government has no reason to delay the implementation of effective measures that will provide a safety net for the ageing population. This is to ensure that society will not face difficult challenges with an elderly population that cannot look after themselves financially.
Wichit Chantanusornsiri is a senior economics reporter, Bangkok Post.