Saving for retirement: a challenge in our ageing society

By next year, it is expected that for the first time in the history of Thailand, the population of older persons will surpass that of children. In 20 years, the number of elderly will double from 11 million (17 per cent of the total population) this year to comprise one-third of the Thai population. 
Lower birth rates, higher longevity, urban development, participation of women in the labour market, labour migration, and so forth are all contributing to this demographic transition. 
One of the main concerns for the future of Thailand is that most working people have not yet preparing for old age. The number of people with non-communicable diseases is rising among those over 30. Diabetes and high blood pressure are most prevalent at late working age (45-59 years). 
Furthermore, most people do not save enough for their retirement. Only 47 per cent of Thai workers have some pension-plan coverage, either mandatory or voluntary, but the amount they are saving is unlikely enough for old age. 
Data from the National Statistics Office reveal that household income is increasing at a lower rate than consumption, implying an expansion of household debt over the past decade. 
This situation is a major threat to fiscal sustainability, as government expenditure on healthcare and old-age income inevitably will rise in parallel with the number of older persons and longer life expectancy of Thai citizens. 
Individuals should be aware of the effects of the ageing society on the economy and their own well-being. It is necessary to equip everyone with both health and financial literacy. Both can be incorporated in all educational levels and communicated more often through public media so as to change people’s attitudes on preventive healthcare, as well as consumption and saving behaviour. 
In addition, public pension funds should be accessible to both salaried and non-salaried workers. 
About 60 per cent of Thailand’s labour force (21.4 million people) is in the non-wage sector, such as people helping in family-run businesses, small entrepreneurs who hire few employees, and the self-employed including street vendors, taxi drivers, and so on. It is not compulsory for non-wage workers to participate in the Social Security Fund. 
The government established the National Savings Fund in 2015, aiming to encourage saving for old age among non-wage workers. However, only 2 per cent of non-wage workers (about 500,000 persons) participate in the programme. Even with government matching grants at a rate that progresses with contributors’ ages, the NSF seems not to be attractive enough for non-wage workers. Its timing and conditions of payment, as well as accessibility to the fund to those in remote areas, might be the reasons. 
Saving mechanisms and financial products need to be accessible and simplified for people of all backgrounds. Likewise, fiscal transparency and governance mechanisms over all public pension funds are essential to ensure the sustainability of the funds and that all pension savings are invested with proper risk diversification so as to generate reasonable rates of return to members. 
 Communities also play an important role in the ageing society. Some of these have established community saving funds similar to the concept of financial cooperatives, promoting both saving and borrowing among their members. Community savings funds hence are helpful to those without collateral to access bank loans but whose business and risk preference are assessable by their neighbours. Community savings funds thus help to lower the informal debts of low-income households and strengthen participatory development among community members.
Sustainable development and well-being of households in the context of the ageing society are no longer the sole responsibility of the public sector. All sectors of the economy are equally vital in supporting a healthy and wealthy society.

AMORNRAT APINUNMAHAKUL is an academic at the Graduate School of Development Economics, National Institute of Development Administration (NIDA). E-mail: [email protected].