It is alarming that nearly half of the country's workforce, comprising 37.5 million people, lacks a retirement savings plan.
Even more shocking is that Thailand is now an ageing society, while the welfare benefits paid by the government to elderly individuals -- aged 60 and above -- range from 600 to 1,000 baht per person per month, depending on their age, which is not sufficient to cover their living expenses.
In 2024, the government allocated 93.2 billion baht's worth of living allowances for the elderly, with nearly 12 million elderly people registering to receive it. This scenario prompted the government to take action and encourage more robust savings among the population.
Q: Why has a retirement lottery been introduced?
The retirement lottery, which involves saving money for retirement through a lottery-like draw, can be seen as another innovation to promote savings. This is to address the weakness in the retirement savings system for informal workers, who previously had no retirement savings system, unlike formal workers who have access to social security funds.
The government had been pushing for the establishment of a national savings fund as a savings source for informal workers for some time and it was formally established as the National Savings Fund (NSF) in 2015. The government initially contributed up to 1,200 baht per year per member, but the cabinet later increased this to a maximum of 1,800 baht per year per member, depending on each member's accumulated contributions and age.
However, over the nine years of NSF's operations, only 2.76 million informal workers registered out of around 20 million informal workers nationwide.
Q: Why aren't Thai people saving for retirement?
The economic difficulties faced by Thais over recent years, particularly following the outbreak of the Covid-19 pandemic in 2020, have led to an increase in poverty and higher levels of household debt.
According to the latest data from the National Economic and Social Development Council (NESDC), household debt tallied 16.3 trillion baht in the fourth quarter of 2023, marking a 3% year-on-year increase, which indicates a slowdown from the 3.4% growth observed in the previous quarter. The household debt-to-GDP ratio stood at 91.3%, a slight increase from 90.9% in the third quarter.
At the same time, the NESDC reported that the ability of households to repay debt has deteriorated.
Data from commercial banks in the fourth quarter of 2023 revealed that non-performing loans (NPLs) for consumption purposes amounted to 158 billion baht, representing 2.88% of total loans, up from 2.79% in the previous quarter.
The loan quality has seen increased risk across all types of loans due to uneven income recovery, affecting household debt repayment ability. The proportion of NPLs for housing and auto loans increased to 3.34% and 2.13%, respectively, from 3.24% and 2.10% in the previous quarter. Similarly, loans that households use to improve liquidity, such as credit card loans and personal loans, also have a higher proportion of bad debt.
While household debt has increased, the level of savings among the public remains static. The Fiscal Policy Office (FPO) reported that when comparing the proportion of household savings to GDP and household debt to GDP during the period 2003-2020, the household savings to GDP ratio remained stable, ranging between 3.24% and 6.18%.
In contrast, the household debt to GDP ratio showed a clear upward trend, increasing from 42.1% in 2003 to 89.2% in 2020, or an average annual increase of 6.58%. This indicates that households have a high level of debt, which may impact purchasing power.
Additionally, the FPO noted that studies show that people in all income groups (quintiles) have incomes that do not keep up with expenses at every household income level. Based on the latest data in 2023, it was found that the average monthly income of Thais in all quintiles in 2021 was 27,352 baht. By 2023, it had risen to 29,030 baht, an increase of 6.1%. Meanwhile, the average monthly expenditure in 2021 was 21,616 baht, and by 2023, it had risen to 23,695 baht, an increase of 9.6%.
The NESDC also reported that Generation Z spending behaviour poses a risk of future debt burdens, particularly through buy now, pay later (BNPL) schemes. The "Thailand Buy Now Pay Later Market Report 2022" estimated the BNPL market value at 55-65 billion baht in 2022.
Gen Z includes individuals born between the late 1990s to the early 2010s. While the exact years can vary depending on the source, a common range is from 1997 to 2012.
The think tank noted that BNPL usage and attitudes reflect several risks:
1) More than half of Gen Z individuals with monthly incomes below 15,000 baht use BNPL services, primarily for clothing and accessories, indicating risky behaviour that may lead to excessive debt in the future.
2) BNPL stimulates easier decision-making for purchasing goods and services. At the same time, BNPL users tend to have multiple types of debt. More than three-fifths indicated that they could make purchasing decisions more quickly if instalment payment options were available. Additionally, nearly half of BNPL users already have existing debt (excluding BNPL debt), which may lead to risks of payment default and bad debt later.
3) Most BNPL users agree with purchasing more non-essential items if instalment payment options were available. They also agree with spending to reward themselves before deciding to save or invest. This reflects that BNPL services may lead to a lack of discipline in saving and investing among users.
Q: Where have the country's savings gone?
The Puey Ungphakorn Institute for Economic Research studied 80 million deposit accounts held with the Deposit Protection Agency and found that overall, more than half of Thais (56.04%) have savings accounts with commercial banks, but the amounts are low. Half of these account holders have less than 3,142 baht in their accounts.
Additionally, 32.8% of depositors (or 12.2 million people) have no more than 500 baht in their accounts, and among them, 4.7 million people have less than 50 baht. Meanwhile, only 0.2% of depositors have more than 10 million baht in their accounts.
The ownership of commercial bank accounts varies by age, area and gender, with women having twice as much in savings compared to men, contrary to developed countries where men typically have more savings than women.
Q: How will the retirement lottery encourage people to save?
The retirement lottery aims to increase the number of members in the NSF beyond the current number.
Deputy Finance Minister Paopoom Rojanasakul anticipates that the number of NSF members will rise to 10 million after the introduction of this retirement lottery.
The retirement lottery will resemble a lottery draw, but the money used to purchase lottery tickets will not be lost like in government lotteries or underground lotteries. Instead, every baht spent on the retirement lottery will be saved in the member's NSF account and will earn returns from NSF investments. Members can receive these funds when they turn 60.
The cabinet approved the concept of the retirement lottery on July 16. The NSF law will need to be amended to accommodate the retirement lottery. The retirement lottery model is as follows:
1. Savers can purchase digital scratch tickets through the NSF application at 50 baht per ticket, with a maximum purchase of 3,000 baht per month.
2. Tickets can be purchased daily, 24 hours a day, with draws held every Friday at 5pm.
3. The first prize is 1,000,000 baht, with five prizes available, and the second prize is 1,000 baht, with 10,000 prizes available. Winners can withdraw their prize money immediately. If all prizes are not claimed in a particular draw, they will roll over to the next draw.
4. Regardless of whether or not the buyer's ticket is a winning ticket, all the money spent on these lottery tickets would be saved in an individual's savings account via the NSF and can be withdrawn at the age of 60 to support retirement savings.
5. The savings in the account will also earn returns from NSF investments until retirement.
Q: Will the retirement lottery address Thai people's saving behaviour?
Ennoo Suesuwan, a member of the NESDC, said the retirement lottery is likely to address the behaviour of Thai people, especially those with low incomes who prefer gambling over saving. This is evident from the fact that on the 1st and 16th of each month, people, especially in rural areas, are so focused on following the government's lottery draw that they are unable to concentrate on anything else.
Mr Ennoo, a former president of the Bank for Agriculture and Agricultural Cooperatives (BAAC), added that in the past, the BAAC had a policy that farmers seeking larger loans needed to have a savings account with the bank to promote saving. However, the level of savings remains very low.
When examining the daily expenses of local residents, it was found that one of their notable expense categories is the money spent on lottery tickets. When the total annual expenditure on lottery tickets is aggregated, it amounts to a significant sum for each person.
Therefore, in 1997, the BAAC initiated the Taweechoke savings lottery to encourage saving, with monthly draws offering prizes that farmers desired, such as pickup trucks.
Mr Ennoo said that the BAAC piloted this savings lottery project in the Northeast, the poorest region of Thailand, during the 1997 financial crisis, known as the Tom Yum Kung crisis.
The results showed that 10 years after the initiative's implementation, farmers had deposited in the Taweechoke savings lottery scheme up to 150 billion baht. During the pandemic, this amount rose to 300 billion baht, and these deposits had a lower withdrawal rate compared to other types of deposits at the BAAC.
"Gambling is seen as a hope for local residents who wish to win a million baht to transform their lives and escape poverty," said Mr Ennoo. "However, whether the retirement lottery project will succeed depends on how much trust the government can build among the people and on the management of the project, which should involve the community in decision-making. For instance, regarding the prizes of the Taweechoke scheme, residents were consulted about what types of prizes they wanted."
