As we strive to defuse a political timebomb through the roadmap, the country is about to face a potential social timebomb: the emergence of an ageing society as a result of demographic change.
In our ageing society, tens of millions of people over 60, in particular those outside government retirement savings schemes and the social security programme, need a security net that enables them to stand on their own feet without being a burden to their families or the state.
This is the reason the state has invented a new fund, the National Savings Fund (NSF), which will open for registration on Aug 20 for this group of people, mostly those in the so-called non-formal sector like freelancers, vendors, taxi drivers and helpers.
The fund, the first of its kind, will help complete the country's social security scheme which caters only for retired state officials and those in the formal sector. The Social Security Fund, for example, covers about 10 million workers while the Government Pension Fund (GPF) is for civil servants, mandatory for some 1.2 million officials who joined the bureaucracy after the law came into force in 1996, and voluntary for older officials.
Many company workers can join a provident fund which requires contributions from both employers and employees, and allocates a lump-sum payment for retirees. But not every employee will have this payment as the provident fund is not compulsory.
Even though we have many retirement savings funds, questions still remain. In particular, will the monthly pension, which is rather low, be enough for retirees?
Take a look at the Social Security Fund. The monthly pension of a worker who has contributed to the fund for 180 months, or 15 years, and is aged over 55, is a maximum of 20% of their salary if it does not exceed 15,000 baht, or about 2,000-3,000 baht a month. With inflation and the cost of living, that is pretty negligible.
It's the same situation for members of the NSF. The new fund is a voluntary system that requires partial contributions from the state.
NSF members, who join the fund at 15, the minimum age by law, and make a monthly deposit at the fixed, maximum rate of 1,100 baht per month, or 13,200 baht per year, will get a 7,385-baht monthly pension payment when they retire in 45 years.
Although the NSF law allows the state to adjust the contribution rate every five years to factor in inflation, the pension still won't amount to much.
The number of elderly is likely to account for 15% of the population or 10.5 million people in 2020. Data from the National Savings Fund Office indicates 87% of retirees depend on income from their children.
Given the change in family patterns, with many couples opting to have fewer children or stay childless, these elderly people will have to depend solely on the state. This will be a big burden for any government. In principle, the state should avoid a system that imposes a heavy burden on the national budget. A lavish welfare system, for example, could pose a financial risk for the government, especially when state income dwindles.
Under such conditions, retirees can have their savings endangered when state finances run into strife as a result of mismanagement. A pension scheme that encourages people to save like the NSF is a good start. It's a smart system that provides a more secure future for those who join, which means a smaller burden for the state.
Wichit Chantanusornsiri is a senior economics reporter, Bangkok Post.