With the Social Security Fund (SSF) facing the existential threat of bankrupt in coming decades, the government should realise this is no time for indecision.
The situation calls for decisive action, or millions of workers and retirees who bank their hope on the state pension fund for their future security will face severe hardship.
Last week, Labour Minister Phiphat Ratchakitprakarn proposed measures to prevent the SSF from collapsing due to insufficient funding.
As Thailand's population ages, the active workforce contributing to the fund is shrinking, while its expenditure -- such as the old age allowance and welfare support -- continue to rise.
According to studies, the fund's expenditure could surpass its income as early as the next 10 years, forcing it to draw on reserves that could be depleted in 30 to 40 years, if nothing is done.
And that is the key point -- if nothing is done. The Labour Minister's promise to keep exploring measures appears to be an attempt to buy time and avoid taking action -- a political gambit the country cannot afford at this critical juncture.
Established in 1990, the SSF has attracted over 24 million workers, contributing to its accumulated assets of 2.6 trillion baht.
However, soon after its establishment, numerous studies suggested the fund's finances were not sustainable. Despite varying assumptions and calculation models, all the studies, including reviews by the International Labour Organization (ILO), reached the same conclusion -- the fund could run out of money within the next few decades.
In fact, Mr. Phiphat himself acknowledged this risk earlier when he first met the newly elected Social Security Board in May.
At that time, the minister proposed exploring certain measures, such as raising the salary cap and increasing contributions to the fund, extending the retirement age from 55 to 60 or 65, and raising the risk ceiling for the fund's investments in hopes of higher returns.
It is noteworthy that these measures are part of the comprehensive reforms necessary not only to avert the fund's downfall but also to enhance its efficiency as a support system for the elderly and as a cushion for the wider population in the event of economic shocks, such as the recent Covid-19 pandemic.
Other, more structural proposals address the fund's welfare component, which currently lags behind the universal coverage or 30-baht scheme, and how to harmonise it with the forthcoming National Pension Fund.
Without policy clarity and the courage to pursue substantial structural changes, major reform is unlikely to happen any time soon. While these measures may not qualify as low-hanging fruit, they are clearly inevitable -- actions that must be taken without delay to ensure the fund's survival.
Raising the salary cap on contributions and the premium rate is a sensible option. The current ceiling of 15,000 baht was set back in 1990 and covered most workers at the time. However, recent studies have found that workers earning more than 15,000 baht now make up about one-third of the workforce.
Additionally, most studies have concluded the current premium is too low to sustain the fund over the coming decades. To ease the burden on all parties, a gradual premium rise has been suggested, such as an increase of 2.5% every 10 years.
Extending the retirement age to slow the fund's expenditure on old age allowances is another clear winner. The current retirement age of 55 was established in 1998 when Thailand's life expectancy was 70. Now, with life expectancy at 87, it is only logical to raise the retirement age -- not only to reduce the fund's expenses but also allow the elderly to lead active lives and continue contributing to the fund.
Since extending the retirement age could affect workers nearing retirement, this measure should be implemented gradually, increasing pension eligibility by a few months over several years to give people time to adjust. This phased approach means it could take several years before the retirement age extension is fully implemented, which underscores the need to start immediately.
If there's one thing that deserves further deliberation, it's the minister's proposal to increase the investment ceiling in high-risk assets from 40% to 50%, aiming to boost returns from 2.5% to 7-8%.
With the economy fluctuating, this move is not only risky but seems unnecessary, especially since Mr Phiphat himself acknowledged the fund has yet to reach the current ceiling, with only about 25% of its investments considered high risk.
As shown, it will require a concerted effort to save the SSF -- and even more to make it a reliable security provider as Thailand navigates demographic ageing and other social transformations. Now is the time to act, not to engage in futile exploration and delay.