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Call for Papers: PIER Research Workshop 2025
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Discussion Paperdp
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Year
2025
2024
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4 August 2021
20211628035200000
No. 157

Putting an Economic Framework into Thailand's Pension Reform

Abstract

Thailand has several old-age income support schemes, ranging from contributory schemes for the formal sector, voluntary savings schemes for the informal sector to the universal noncontributory social assistance scheme. Although these schemes together can cover almost all Thai citizens, several challenges remain. This article focuses on the inadequacy of the mandatory Social Security system for the formal workers (known as Article 33). We identify four key reasons leading to low pension benefits: (i) a non-trivial fraction of workers left the formal sector before being eligible for annuity; (ii) those who left Article 33 but voluntarily joined Article 39 would receive unfair reduced pension benefits; (iii) the scheme did not use any indexation, meaning that the specified amount of past earnings, wage ceiling and benefits have lower value over time; and (iv) the scheme has no income redistribution mechanism. The scheme's financial sustainability is also a concern. We proposed some adjustments to solve the inadequacy problem, as well as a strategy to delay claiming while minimizing the impact to beneficiaries in a hope to alleviate its financing pressure. In addition, broader issues of lack of a unified authority on pension policies, weak incentives of voluntary schemes, and complicacy of adjusting Civil Servants' pension scheme are briefly discussed.

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JEL: H55J26D14D02
Tags: old-age incomesocial securitypensionthailand
The views expressed in this workshop do not necessarily reflect the views of the Puey Ungphakorn Institute for Economic Research or the Bank of Thailand.
Nada Wasi
Nada Wasi
Puey Ungphakorn Institute for Economic Research
Chinnawat Devahastin Na Ayudhya
Chinnawat Devahastin Na Ayudhya
Bank of Thailand
Ponpoje Porapakkarm
Ponpoje Porapakkarm
National Graduate Institute for Policy Studies
Nuarpear Lekfuangfu
Nuarpear Lekfuangfu
Universidad Carlos III de Madrid
Suphanit Piyapromdee
Suphanit Piyapromdee
University College London

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