Pension Fund, Provident Fund and Social Security System in Thailand

By
Niwat Kanjanaphoomin
Government Pension Fund

summarized by azie

The purpose of this report is to review the challenge for Thai retirement system of government to plays a key role in laying out a master plan on pension system to ensure adequate safety net for its citizen because the world is aging will result of two long-term trends: falling fertility rates and rising life expectancy. Over the next few decades, it will restructure the economy. Thus, all governments everywhere will sooner or later have to consider pension reform is the high priority agenda in their countries because it will put enormous pressure on government budgets and national economies.
This paper also outlines the demographic transformation in Thailand which will restructure the Thai economy because the population annual growth has dropped, life expectancy for Thai has rose rapidly, Old Dependency Ratio, and Unemployment. The first pension system in Thailand was founded for the public sector with the enactment of the Pension Act in 1902 and now Thailand currently has a few system covering different sectors of employment. The Thai pension system can be categorized into two sectors; public and private sectors. Within both sectors there are some groups of workers that are not covered by any mandatory pension system.
The multi-Pillar as defined by the World Bank has its merit as the three pillars form an integrated pension system needed to provide individuals with adequate income after retirement. Although certain Pillars have already been in existence in Thailand, they are not extensive enough to cover the majority of the population. There is still a room for
improvement in terms of coverage, sustainability, and proper balance among sectors.
It is a positive sign that the government’s efforts are now being further pursued for pension reform by establishing mandatory provident fund. As soon as the study is completed, it is the government who must decide how and when the program is to be implemented. It is quite natural to see some resistance from parties involved since pension programs usually require trade-off between current costs and future benefits. The government may have to sacrifice some current tax revenues to induce incentives for program participation.
However, these foregone current incomes will be more than justified by less future obligations. The more each individual saves, the more self-reliance he or she would become upon reaching retirement age, and thus the less burden on the government’s future budget. These, in turn, will benefit the society as a whole.