Govt mustn't play with pension pot

Govt mustn't play with pension pot

Although Prime Minister Prayut Chan-o-cha meant well when he suggested extending Social Security Fund loans to subscribers, it was an idea that immediately triggered concerns that it might hurt the fund and put pension payments at risk.

Deputy Prime Minister Wissanu Krea-ngam quickly clarified the issue which he said stemmed from a circular issued by the cabinet secretariat to heads of government agencies on Nov 8.

In the document, direct from a cabinet meeting on Nov 6, Gen Prayut told the Social Security Office (SSO) which is under the Labour Ministry to coordinate with other agencies, such as the Finance Ministry, and the Social Development and Human Security Ministry, to explore ways of making better use of the money in the SSF, such as by extending loans to its subscribers.

Mr Wissanu pointed out Gen Prayut simply wanted to consider all options and was not giving "an order", as previously rumoured.

Gen Prayut said the subscribers are the "owners" of the fund and should be able to access it as early as possible, not only when they leave their job or retire. The fund is also contributed to by the government and employers and, in proposing such an initiative, the prime minister missed the point -- that the SSF is a welfare scheme.

This is the reason that his initiative faced resistance from academics and social security experts. They argue that issuing loans to individual subscribers is too risky. Moreover, the SSO has neither the experience nor the infrastructure to assume the role of lender and would likely be ill-suited to managing bad or non-performing loans.

Some rightly pointed out that if the Prayut government really wants to ease hardship for SSF members during the economic downturn, it should talk to commercial banks to explore favourable loan programmes for this group of people, who are mostly low-paid, low-skilled blue-collar workers.

Gen Prayut should heed this strong negative reaction and immediately drop the idea. He should take this as a lesson that the country sees the social security scheme as welfare based on the idea of saving, and should refrain from including it in any populist new loans programme. What he needs to do is to improve welfare measures and provide benefits to the people.

To achieve this, the government should in the short term work towards making the SSO more efficient so it can serve its members better, particularly with regard to making people aware of the benefits they are entitled to.

At the same time, the prime minister's SSF loans idea has shed light on the potential problems the fund will encounter as a result of a demographic change that sees the country becoming an ageing society. This trend means the country will have fewer people of working age contributing to a shrinking pot that will have to support a larger number of pensioners. It is quite clear that without major changes the SSF could collapse under this strain.

It's necessary the Prayut government pays serious attention to a study by the International Labour Organisation (ILO) which predicted the fund could go into the red in less than three decades.

The ILO study which was commissioned by the Social Security Office offered a number of recommendations that the government should consider if it wants to secure a better future for the SSF members and help them out of hardship.

Chief among its recommendations is raising the age of retirement in order to extend the period that members pay into the SSF. It also suggested an increase in the rate of total contribution be applied gradually to avoid the prospect of immediate resistance from employers and employees.

According to the study, which was published in Thai language media, Thailand's total contribution rate is among the lowest in Asia, at 6.1%, while some countries, such as China, Malaysia and Vietnam have much higher contribution rates, at more than 20%. The Philippines, South Korea and Australia also have contribution rates greater than 10% each.

The study predicted that unless Thailand raises its total contribution rate to at least 16.4% by 2054, the fund will be in deep trouble. But it must be done step by step in order to avoid resentment. The state must not any waste more time and should begin assessing the most effective methods to implement these suggestions.

Editorial

Bangkok Post editorial column

These editorials represent Bangkok Post thoughts about current issues and situations.

Email : anchaleek@bangkokpost.co.th

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