Thailand Grapples with Looming Social Security Fund Crisis

Proposals to raise retirement age and contributions surface as fund projected to run dry within three decades

 

Thai authorities are considering a series of significant reforms to the Social Security Fund (SSO) amid projections that it could become insolvent within the next 30 years. 

 

A study conducted in 2020 by the SSF and the International Labour Organization (ILO) has highlighted an impending imbalance between income and expenditure due to an ageing population and consistently expanding benefits.

 

Without intervention, the fund's reserves are forecast to be depleted by 2054.

 

Labour Minister Phipat Ratchakitprakarn has outlined four potential strategies to avert this crisis: extending the retirement age, gradually increasing contribution rates, expanding the wage ceiling for contributions, and fostering closer collaboration between the SSF and key stakeholders in policy formulation.

 

Currently, the standard retirement age in Thailand is 55, which is notably low compared to other nations in the region. Proposals suggest raising this to 65, a concept discussed at the SSO Sustainable 2024 conference.


  

Many countries, such as Sweden (67), have already implemented higher retirement ages. Any increase in Thailand, however, would be phased in gradually over the long term.

 

Actuarial assessments indicate that contribution rates may need to rise to as high as 20.2% to ensure the fund's sustainability for the next 75 years.

 

Recognising the economic impact of an immediate, sharp increase, the government is considering a series of smaller, phased increases over several years.

 

Expanding the current cap on wages subject to contributions is another measure under consideration.

 

Phipat also addressed ongoing efforts to reform the SSF's governance structure, aiming to remove it from the direct control of the civil service.

 

The goal is to establish an independent body managed by professionals, allowing for greater operational flexibility and service efficiency. 
  

Various models have been explored over the years, including transforming the SSF into a public organisation or a special service unit.

 

The most recent proposal involves creating a separate, independent investment management division. However, previous attempts at reform have faced hurdles, often coinciding with changes in government.

 

Concerns surrounding the proposed structural changes include ensuring robust governance, financial management, investment oversight, and prudent personnel management to safeguard the interests of the over 24 million insured individuals currently covered by the SSF.

 

While the path to reform may be challenging, having a clear plan is considered a crucial first step in mitigating the potential consequences of the projected financial shortfall.

(2025/05/05-00:00)