The Social Security Fund (SSF) is at risk of collapse if its pension benefits are not adjusted, the Thailand Development Research Institute (TDRI) warned yesterday.
However, the Social Security Office (SSO), which begins paying the pensions this year via the SSF, said it was confident the fund was sufficient.
Dr Worawan Chandoevwit, TDRI research director for social security, said the scheme would enable pensioners to receive money in excess of what they and their employers had paid into the SSF.
“The longer their retirement, the bigger the financial loss will be that the SSF will have to shoulder,” she said.
Under the current rules, any person who has made contributions to the SSF for not less than 180 months is entitled to a pension when he or she is at least 55 years old and terminates his or her insurance status. The pension, which is awarded on a monthly basis, is equivalent to 15 per cent of the last 60 months of a recipient’s average wage, which is used as a basis to calculate the contributions.
“After paying the pension at such a rate for about 25 years, the SSF will find its financial resources dwindling significantly,” Worawan said.
The SSF now has more than Bt1 trillion in hand. Of that amount, some Bt800 billion is for pension benefits.
Worawan pointed out that the life span of Thais was increasing, while the country’s lower birth rate would likely result in fewer contributors to the scheme.
She said that although the SSF could increase its income via investments, it was be unlikely that the rate of return would rise above 10 per cent. “This means that the scheme will eventually be operating at a loss and will collapse in the end.”
Worawan said the best option was for the SSF to pay out only what it received for the pension benefits.
Chaiwat Phanpanich, a senior official at the SSO, played down the concerns about the SSF’s financial stability.
“We believe most people eligible for the pension will opt for the one-off gratuity, instead of the [monthly] pension,” he said.
Those who have made contributions to the pension scheme for more than 12 months would be eligible to a one-off gratuity, the amount of which is equal to the amount of the contributions made by the recipient and his or her employer.
With the option of the one-off gratuity, Chaiwat said the SSF would not have any significant long-term financial burden regarding the payment of old-age benefits.
“Besides, the investments by SSF have generated a profit of at least Bt10 billion a year,” he pointed out.
First published: The Nation, January 4, 2014