Thailands pension system is very much a work in progress. The two principal existing schemes, the Old Age Pension Fund (OAPF) and the Government Pension Fund (GPF), cover roughly 9 million workers between them [see table at end of story]. Another 1.5 million workers are covered by corporate provident funds. A few wealthier Thais benefit from the retirement mutual funds scheme.
The National Pension Fund is expected to bring the remaining 12.4 million of Thailands formal salaried employees, chiefly private sector workers, within a mandatory defined contribution pension scheme. However, as Visit Tantisunthorn, secretary general of the GPF admits, the rest of Thailands estimated 35 million workers will remain outside any formal pension scheme. The informal sector will have nothing farmers, taxi drivers, street cleaners, the self-employed, he says.
There are as yet no concrete plans to provide any form of assistance for this mass of workers. Although there has been discussion about expanding the OAPF to include them, says Chanchai Supasagee, director of corporate governance and compliance at the GPF, it is likely that these workers might be left to fend for themselves. The informal sector will have to rely on pillar three, he says. Theyll have to buy a pension plan.
Just how more than 20 million street cleaners, taxi drivers and farmers will be sold pension plans is a question that neither Visit nor Chanchai can answer. You cant include the informal sector because how can you collect the money? asks Visit. The government should really think about incentives to encourage them to save themselves. If the government leaves more of the pension reforms for salaried workers to the private sector, it might even find the time to do just that.
|Thailand pension system|
|Thailand||Pillar 1||Pillar 2||Pillar 3||Pillar 3|
|Old Age Pension Fund||Government Pension Fund||Provident Fund||Retirement mutual funds|
|Mandatory defined benefit Partially-funded PAYGO (since 1999)||Mandatory defined contribution Funded (since 1997)||Predominantly voluntary defined contribution (since 1987)||Voluntary defined contribution (since 2001)|
|Coverage||Private sector employees (7.8m)||Central government officials who started employment after March 27 1997 (1.2m)||State and other government enterprise employees (1.5m)||Voluntary|
|Contribution||Employer: 3% of wages Employee: 3% of wages||Employee: 3% of wages Government: 5% of wages||Employee: 3% to 15% of wages Employer: matched contributions||Up to 15% of wages|
|Management||Ministry of Labour and Social Welfare||GPF Board with strict limits||Managed by private sector according to government guidelines||Managed by private sector according to government guidelines|
|Benefits||Annuity of up to 35% of final wages||Lump sum at retirement. Target replacement ratio of up to 70%||Lump sum on retirement or resignation based on contributions||Lump sum on retirement based on contributions|
|Taxation||All contributions and benefits tax exempt||All contributions and benefits tax exempt||All contributions and benefits tax exempt||All contributions and benefits tax exempt|
|Source: CLSA/Stirling Finance|