Putting an Economic Framework into Thailand's Pension Reform
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.