Thailand urgently needs national fund
Written by changthai11 on Monday, October 6th, 2008
Thailand urgently needs national fund
SOMPORN THAPANACHAI
Thailand should speed up the establishment of a National Provident Fund (NPF) in preparation for the rising welfare expenses that will emerge as the population ages over the next two decades, suggests the international human resources consulting firm Watson Wyatt.
An earlier Watson study showed that 45% of the population in Thailand would be at least 50 years old in 2050. That compares with 24% in 2005 and a forecast over-50 ratio of 38% in 2030.
Gene H. Wickers, Watson’s global director for benefits consulting based in the United States, said the demographic transformation of Thailand was similar to that of the US. However, the US workforce would continue to be supported by migrant workers from countries including Mexico, while Thailand would face the challenges of zero population growth by 2021.
Comparing to other countries in Asia Pacific, Thailand’s ageing population is in the mid-range (see chart). Hong Kong is projected to have the highest over-50 ratio at 59%, followed by 57% in Singapore, 53% in South Korea and 48% in Taiwan. The study also indicated that Asia Pacific, in 2050, would be home to 980 million people aged 60 and above.
Mr Wickers said Thailand would lose some of its ability to maintain competitiveness and economic growth in the long term when compared to countries such as the Philippines or India, which would have younger populations, because Thailand would need to spend more on caring for the elderly.
In the 2007 fiscal year, the Thai government spent 10.58 billion baht to care for 1.8 million senior citizens, out of a total of 7.04 million. The budget is likely to increase every year.
Thai government realises the urgency of this issue and has already proposed a mandatory NPF requiring employers and employees to contribute 3% of salaries each into the fund.
Thailand had a workforce of 36.87 million at the end of 2007 but only 10.91 million were covered by retirement programmes, including 9.15 million private-sector workers, 1.49 million civil servants and 270,000 state enterprise employees.
For private-sector workers covered under the Social Security Fund, the amount of their pensions is unlikely to cover their monthly needs after retirement, projected at 50-60% of final salaries.
With the government perhaps unable to bear all costs relating to the welfare of the elderly, Mr Wickers said there were two choices: transferring risk to individuals through encouragement from employers and incentives from government, or extending the retirement age.
“The difference between Thailand and the US is that Thailand has not yet prepared to handle the situation while the US has already declared that it will solve the problem by 2050. It’s not too late to solve the problem for Thailand,” said Mr Wickers.
Andrew Heard, the company’s regional practice director for Asia Pacific, said that generally employees should save 10% of their earnings for retirement but this percentage would be applicable to those who start saving early.
Though retirement packages are used as a tool to attract talent in organisations globally, the majority of candidates still do not realise the significance of planning for retirement as they would choose attractive compensation instead of a retirement plan.
Mr Heard believes the appropriate retirement scheme should comprise personal, corporate and government savings.
