The cabinet's decision to approve a Labour Ministry amendment on May 10, which would allow subscribers of the Social Security Fund (SSF) to get a partial advance on their pension and use their pension as collateral for loans, has been met with both cheers and concern.
While Labour Minister Suchart Chomklin says the proposed changes will give a financial lifeline to SSF members during this difficult time, economists and labour advocates warn it could be a disaster in the making -- saying contributions to the fund will match expenditures by 2039, and the fund will likely be in a deficit by 2044.
Currently, the SSF has about 2.3 trillion baht in its coffers -- much of it is in the pension scheme, which started collecting contributions in 1999 and began paying out benefits to qualified subscribers in 2014.
Those who support the amendment believe that for SSF subscribers who are in desperate need of money, a partial advance on their pension, is better than relying on loan sharks.
Mr Suchart said the amendment, which will still need to be scrutinised by parliament, will allow eligible SSF members to choose between receiving their pension in one lump sum, or in monthly instalments for the rest of their lives.
Those who are eligible to choose must have contributed to the SSF for 180 months, be at least 55 years old and have left their jobs. Under the current law, they are entitled to monthly payouts only.
The first option is meant to help SSF subscribers who need to cash out their pension for post-retirement investments, according to the labour minister.
Under the proposed amendment, SSF subscribers will also be able to use part of their pension as collateral for a bank loan. The ceiling will be set at 30% of their contribution to the fund.
This is expected to help members escape the clutches of loan sharks who charge exorbitant interest rates, he said.
During the pandemic, while employers could use their assets such as land to obtain loans to keep their businesses alive, small-time workers couldn't access such loans, so many turned to illegal lenders, he said.
Mr Suchart said SSF members can also get a partial advance on their pension, capped at 30% of their total contribution to the fund, in cases of emergencies and/or during an economic crisis.
An up to 4% fee is likely to be imposed on partial advances to help protect other subscribers, he said.
"In the short term, it won't affect fund stability. But in the long term, the fund's financial reserves are predicted to decline by 3%-4%. That's why a 3% fee is being considered," he said.
He said the proposed changes, pushed by the Labour Ministry, promise to deliver more benefits to some 12 million SSF subscribers, the biggest since the establishment of the SSF.
Not everyone is excited
Several agencies are nervous about the planned revision to the SSF regulations, among which are the Thailand Development Research Institute (TDRI), the National Economic and Social Development Council (NESDC), and the Budget Bureau, according to a source close to the matter.
They argued that the proposal is against the basic principle of social security, which is to minimise risks for fund members, the source said.
Partial advances will create a long-term financial burden for subscribers, which may drive them towards seeking further state assistance in the future, said the source.
The Budget Bureau said the amendment must make it clear that partial advances and collateralising pensions will only be allowed during a crisis, the source added.
An SSF member insured under Section 33 of the Social Security Act told the Bangkok Post she is opposed to the changes, believing they will trigger a massive run as soon as the amendment comes into effect.
Furthermore, with the ceiling capped at 30%, each subscriber can only expect to receive 20,000-30,000 baht, which is unlikely to be enough to help them resolve their debt problems, she said.
She said there are other measures the government can use to ease the financial hardship of SSF members during an economic slump without messing with the fund.
These include extending unemployment benefits from six months to eight months and introducing mechanisms to refinance loans, she said.
"Some members want to get an advance on their pension payout but those responsible must consider it carefully. We are becoming an ageing society, which will see more retirees and a smaller workforce. We should boost the fund," she said.
Unlocking savings
Another SSF subscriber, however, said the changes to the social security law will unlock savings which would otherwise be untouchable until subscribers reach the age of 55 -- too late for those facing a difficult time.
He pointed out that if retirement savings can be withdrawn early to provide financial relief, people will see how useful the social security system is and more people will invest more in the pension fund.
The legal change, he said, simply gives SSF members more options and at the end of the day, it is up to them to decide what is best for them.
"When people are desperate, they will go to loan sharks despite the outrageous interest they charge. Those who don't owe money to loan sharks won't understand how bad it is," he said.
"[A partial advance] can help these people avoid loan sharks, or even free them from their grip," he said.
Arunee Srito, a 70-year-old former president of the Thai Kriang labour union, said she and several other retirees opted to remain in the SSF to get medical benefits, which means they do not get pension payouts.
"The proposed changes are what we, the first-generation members of the SSF, have been calling for. We will finally get to spend our retirement savings," she said.
That said, the proposed amendment will still have to be examined by the Council of State before it is forwarded to parliament for deliberation.
It could end up getting buried among a pile of bills or moved up for consideration depending on the political situation.
If the government sees it as being a priority task, then the amendment process could be wrapped up within the year, and the new rules would take effect next year. At least 15 other laws would also need to be amended to facilitate the changes.