The Social Security Office is seeking the cabinet's approval for its proposal to start paying out pension benefits to its subscribers once they reach the age of 60 -- as opposed to 55 -- drawing the ire of labour groups, which are the main subscribers to the fund.
The office argued that the move is vital for the sustainability of the social security fund.
As advances in medical technology have allowed more people to live longer, more people are claiming the monthly payout.
At the same time, the number of young workers is dwindling, which means contributions to the fund are shrinking.
Under its proposal, the SSO will offer other incentives to make up for the delay in pension payouts.
At present, those who have contributed to the fund for 20 years will receive 5,250 baht a month from the fund once they turn 55.
Under the new scheme, however, they will receive 6,375 baht a month once they become eligible for pension benefits at 60.
In addition to the delay of pension payout, the SSO is also asking the cabinet to approve an increase in members' contributions to the fund to ensure its sustainability.
According to the office, without a payout delay or hike in contributions, the fund will run dry in 2036, when the number of people in retirement is projected to reach 30% of the population.
That said, the proposals aren't practical, especially with the economy still struggling in the Covid-19 pandemic. After the pandemic hit, many companies allowed their employees aged 55 and above to opt for early retirement.
If the SSO raises the pension age to 60, it will undoubtedly have an impact on those who opted to retire early -- many of whom have contributed more than 20 years to the fund, and chose to retire early under the assumption that they will start receiving their pension at 55.
To be fair, it cannot be denied that the government's decision to slash employees' contributions to the fund from 3% to 0.5% -- which was taken to provide some financial relief during the pandemic -- will have an impact on the fund's sustainability in the long run. The measure was estimated to cost the fund about 20 billion baht, which undoubtedly affected its ability to pay out pension benefits.
That said, jacking up contributions and delaying pension payouts aren't the answer, especially considering the state of the economy at the moment.
Instead, the government should subsidise the pension scheme, which will be key to ensuring social security in an ageing society.
Above all, urgent reform of the fund's management should be undertaken.
The social security fund is known to be inefficiently managed, despite having some two trillion baht in the pot from employers and employees in the private sector.
It would make more sense to reform the way the fund is managed by bringing in professionals who can direct the fund to effective investments which would enable it to grow.
The fund, which is now managed conservatively, may have to increase investment in risky assets with high returns.
However, to do so successfully, it will need to get its asset management processes restructured to be both more professional and more transparent.
