Worawan Chandoevwit: All of us need income security


Worawan Chandoevwit
Thailand Development Research Institute

It is more likely that Thai people live longer than 70 years of age. Imagine you are lucky to reach the age of 75. By that age, your physical condition deteriorates and you may be unemployable. You still need to consume and have social life.

Most of us would be happy if our consumption can go smoothly no matter how old we are. Question is how to support such consumption smoothing.

There are many modes we can choose to smooth our consumption across life cycle. For example, we may train our children to take care of us. We may save in various options for future consumption.

The current Thai elderly generation prefer children-dependency mode to self-reliance mode. A national survey conducted by the National Statistical Office (NSO) in 2010 shows that about 87% of elderly expect financial support from their children. How many percentages of children can elderly really financially depend on? An Elderly Survey in 2007, also conducted by the NSO, shows that only 46% of children who live with elderly used to give money to elderly and 70% of children who live far away sent remittance to elderly. Do not expect a large sum of support. Cash from children is more likely below THB 5,000 per year for children living with elderly and THB 10,000 per year for children living far away. Only about 10% of children who sent remittance can provide a larger sum of THB30,000 in a year.

Financial security is a necessary condition for elderly security. However, a sufficient condition for their overall well-being is caring from children. An extremely high proportion of Thai elderly (96%) want their children to help them when visiting doctor or take care of them when being in ill-health.

Mother Nature tells us that we are all getting old. How many of us prepare for such state? Elderly survey in 2007 show that about 40% of Thai elderly used to thought about financial preparation but actually did not take any action. No doubt that only 3% of elderly can live on their own saving and another 4% (who used to work for government) live on pension. We do not need luck to be those 7%. We can prepare with some cooperation from all of us.

In 2011, the former government enacted the National Saving Fund (NSF) Act that allows individuals to save for retirement with government contribution 50%-100% of their saving depending on their age group. Those who start saving at early age will have a large sum of money when they reach 60 years old. The Act promotes individual to save and to have income security at later life.

However, the current government seems to freeze the policy. They are almost discussing nothing about how to implement the NSF law. When civil societies who pushed the former government to enact the law asked about the progress of NSF policy implementation, the government starts scratching. And out of nowhere, the Minister of Finance wants to transfer the mentioned saving option to the Social Security Fund (SSF) Law, including individuals who save as Article 40 of the SSF. Does he really not know that before this law was enacted, people from all sectors involved in this policy dialogue? It was not the success of the former government alone that finally could enact the NSF law, but it was about people participation that made their need come true.

Government has to response to what people need. A demand for social welfare survey in 2010 (by NSO) showed that about 80% of Thais want to save for retirement. About 55% want to and are able to. But, another 24% are not sure about their regular commitment to saving.

Starting a defined benefit pension system when we move into aging society is a big challenge for the government. Promoting people to save with some help from society is more feasible. Thailand has come this far. The law has been prepared. It now lacks only the gut of the government to move on.