Ministry to cap retirement funding at 3% of GDP
NSF scheme receives flood of applications
The Finance Ministry will limit funding for retirement safety net schemes to a maximum of 3% of GDP, although the actual amount is expected to rise rapidly.
Deputy Finance Minister Wisudhi Srisuphan yesterday referred to a Fiscal Policy Office (FPO) study showing annual funding needs for such schemes would surge to 873 billion baht by 2025 from 291 billion or 2.2% of GDP this year.
But GDP is also expected to grow, allowing the government to stick to the 3% limit, he said.
The government offers the Government Pension Fund (GPF), a non-contribution pension for state officials; the Social Security Fund (SSF), which provides a living allowance for the elderly; and the new National Savings Fund (NSF), which provides retirement pensions to self-employed workers.
The NSF, launched in August, has received an overwhelming response -- 280,000 applications so far, already surpassing the 100,000-200,000 forecast for the entire first year.
As of June, 45 million Thais were aged 15-60: 17 million formal workers, 22 million self-employed and 6 million not in the labour market. Some 25 million were not of working age: 11 million under 15 and the rest over 60.
Nawaporn Wiriyanupong, a senior economist at the FPO, said her office was concerned that the rising amount required to provide financial security to senior citizens could pose a risk to the state's budget in the long run, forcing a hunt for off-budget funding.
As an example, she pointed to the British government using profits from selling lottery tickets to fund its welfare scheme for the elderly.
Ensuring that savings are sufficient to allow retirees to live comfortably is a challenge for all countries, Mrs Nawaporn said, adding that some countries had extended the retirement age, increased pension fund contributions or adjusted funds' investment policies for better returns.
In the meantime, GPF secretary-general Sombat Narawuthichai said the fund's return as of mid-September stood at 2.5% to 2.7%, meeting the target of 2.5%.