The Fiscal Policy Office (FPO) has warned that the Social Security Fund (SSF) may be insufficient to handle long-term payments.
The office has recommended that the government increase its additional contribution to 18%, up from the current 12.75%, while accelerating settlement of outstanding debts owed to the fund totalling 71.4 billion baht.
In March of this year, the FPO released its fiscal risk report for fiscal 2023. Although it covers risks from the previous fiscal year, the FPO typically reports on various fiscal risks looking to the future.
One long-term risk the FPO is monitoring is the adequacy of old age pensions in the SSF, which covers various expenditures such as accidents, illness, unemployment, and retirement payments for qualifying members aged 55 and over, with at least 15 years of membership.
Despite ongoing increases in old age pension costs, with the value in 2023 amounting to 2.3 trillion baht in 2023, up from 1.9 trillion baht in 2018, the adequacy of funds remains a long-term issue that warrants monitoring, said the FPO.
A study found the present value of estimated revenue per net expenditure over the next 75 years is only 0.07 times, which is relatively low compared with global standards. The average funding ratio of the largest 100 state pension funds in the US is around 0.7 times.
A funding ratio or funded ratio measures the value of a pension plan's assets divided by its liabilities.
To address these issues, a source from the Finance Ministry who requested anonymity said the SSF may need to consider increasing its additional contribution rate to a more suitable 18%, as well as other measures such as raising the retirement age and expanding the maximum wage base.
The source said the Labour Ministry is considering proposing draft ministerial regulations to set minimum and maximum wages to be used as the basis for calculating social security contributions.
The key point is gradually adjusting the maximum wage base from 15,000 baht to 23,000 baht, said the source. This expansion of the wage ceiling will lead to corresponding increases in fund contributions.
The source said the government should prioritise allocating budgetary resources to settle outstanding contributions owed to the SSF, totalling 71.4 billion baht as of September 2023.
During the pandemic, the government implemented measures to reduce member contributions to the SSF, aiming to support their liquidity during the economic hardships.
However, this move posed only short-term risks as contribution rates have returned to normal levels and benefits for illness have decreased following the easing of the pandemic, said the source.
