SSO mulls raising age for pensions to avoid fund running out of cash by 2047

Options worry beneficiaries, who demand say in any changes

Salaried workers and wage earners under the Social Security Fund may have to boost their monthly contribution to 5 per cent of their earnings from the current 3 per cent to cover future pension payments.

The Social Security Office will start paying the first pension under the national pension schemein the next five years. At the current contribution rate, the entire SSO fund will run out by 2047.

A solution, proposed by the International Labour Organisation (ILO), is that the minimum age of pensioners is extended from 55 or after they begin contributing for at least 15 years, to 62 or 63 years of age.

This solution is, however, likely to be opposed by beneficiaries.

The ILO has proposed two other options: an increase in monthly contribution from beneficiaries, 8,593,693 of whom are salaried people, while another 579,275 people voluntarily contribute each month.

An ILO study showed that if employers and beneficiaries increased their monthly contribution by another 1.6 per cent every 10 years starting from 2020, the SSO fund would be sufficient to pay pensions until 2100.

The other ILO solution is to ensure that the SSO invest wisely in overseas stock markets and investment funds for maximum profits while taking minimal risks.

Under SSO regulations, those entitled to a monthly pension paid until they die are salaried people whose monthly contributions continue for 15 years.

The first 6,278 people are entitled to Bt230 million in total pension payments by 2014. Beneficiaries whose monthly contributions continue for less than 15 years get a one-time payment after retirement.

There have been 46,387 beneficiaries receiving a one-time payment totalling Bt798.3 million since January 2005 when the system became effective. In 2014, there will be 150,396 beneficiaries entitled to a one-time payment, in addition to 6,278 who are entitled to monthly pensions until they die.

Thailand's demography is changing, with a rapid increase in the number of retirees, while the number of people of working age remains stable - meaning there would be fewer contributors to the fund as the number of pensioners keeps on rising.

The entire SSO fund has now reached Bt6.121 trillion as of December 2008, more than Bt5 trillion of which is earmarked for pension payments. By 2014, though, the SSO fund is expected to reduce to Bt1 trillion, and the number of beneficiaries entitled to both monthly and one-time payments will have increased.

By 2038, the number of beneficiaries will rise to 3.13 million, who will be entitled to a total of Bt8 trillion in pension payments. By then the SSO fund would have started to run out of money, until it is exhausted by 2047, if the monthly contribution rates from beneficiaries, employers and the government remain at the current rate of 3 per cent.

SSO secretary-general Pan Wannaphinit said the extension of the qualification age from 55 to 62 or 63 was an international standard, and that the salary ceiling of Bt15,000 - which is used for all beneficiaries no matter how high their salaries - will remain unchanged, because adjustment would cause technical difficulties.

Wilaiwan sae-Tia, chairwoman of the Thai Labour Solidarity Committee, said the SSO should consult the beneficiaries over any changes or conditions that would affect them. She said the proposed extension of the age threshold from 55 to 63 was unfair to beneficiaries, especially labourers and low-income earners. "All beneficiaries own the SSO fund. If there is any change made without our approval there will be problems. The SSO cannot think for us," she said.

Chalee Loisoong, chairman of a network of factory workers in the metal and automotive industries, agreed with the age extension and the increase in monthly contributions. He said the money belonged to the beneficiaries and their ability to afford a higher financial burden should also be considered. "That would need mutual agreement among the beneficiaries or their representatives," he said.

Sunate Phoowongkrai, a deputy head of labour unions based in the East, said the SSO needed to provide sufficient information and reasons for the age extension. Rung Duangsorraya, a deputy head of Ford's and Mazda's labour unions, said 55 was the right age for pension payments and said factory workers did not remain in the job until they turned 60 because work was hard and there were occupational hazards.

"Factory workers deserve to immediately get the money if they decide to retire at 55. Who will [agree] if the age [threshold] is lengthened further?"