Thailand ‘Grew Old Before it Grew Rich’, Economist Warns As Retirement Gap Widens

 

KKP’s Pipat Luengnaruemitchai says a shrinking workforce, thin pension coverage and rising longevity leave Thais to plan and invest for themselves.

 

Thailand is ageing faster than its income can support, and most workers are unprepared for retirement, according to Dr Pipat Luengnaruemitchai, chief economist at Kiatnakin Phatra Financial Group (KKP). He urged individuals to take responsibility for their own financial planning.

 

Speaking at a media briefing on Monday (November 2), Dr Pipat said about 24 per cent of Thais are already over 60, a share expected to rise to roughly one in three within 25 years.

 

KKP’s presentation, drawing on UN data, put the figure at 36 per cent by 2049. The number of workers per older person is projected to fall from 5.5 to 1.8 by 2060.

 

 

Ageing before getting rich

What worries him most, Dr Pipat said, is that Thailand is older than its income suggests. The median age is about 41 years, similar to China’s, yet GDP per capita is only about US$7,200, roughly half of China’s.

 

Most countries with a similar age profile are considerably richer and have stronger social safety nets. The economic backdrop adds to the strain.

 

Thailand is the only ASEAN economy whose population is shrinking, he said, and he expects growth of around 2.5 per cent this year. Even after revisions, he said, this would still make Thailand the slowest-growing economy in Asia, while Taiwan, Vietnam and Malaysia are expanding far faster.

 

 

Thin safety nets

Surveys suggest Thais are poorly prepared, he said. A Society of Actuaries Research Institute poll of 750 private-sector employees found that 86 per cent expect to retire as planned, but only 5 per cent actually do. Some 73 per cent reach retirement with less than 60 per cent of what they need.

 

 

 

Pension coverage is limited. Dr Pipat said only about 3.1 million people belong to provident funds, out of a labour force of roughly 50 million, or under 10 per cent.

 

Many workers rely on social security alone, which he said pays at most 5,000 to 7,000 baht a month for those who contribute throughout their working lives.

 

Around 70 per cent of the income of Thais over 60 comes from their children or from continuing to work, while only about 7 per cent depend on retirement savings.

 

That model will become harder to sustain, he warned, as each worker must support more older people. The state is unlikely to fill the gap, he said.

 

The social security fund has been projected to run short within 20 to 30 years, leaving only three options: higher contributions, a later retirement age or lower benefits. He added that the 30-baht healthcare scheme would be difficult to sustain in 15 to 20 years.

 

 

How much is enough?

Dr Pipat outlined a three-part framework of budgeting, protecting and investing. For the first step, he pointed to the “4 per cent rule”, drawn from US research that found withdrawing 4 per cent of savings a year, adjusted for inflation, gave a high chance of a portfolio lasting 30 years.

 

It implies retirement savings of about 25 times annual spending. The presentation gave the example of someone spending 60,000 baht a month, who would need around 18 million baht.

 

He stressed this is only a starting point. People who want to leave an inheritance or who face costs rising faster than headline inflation will need more.

 

KKP cited medical costs rising about 11 per cent a year, elderly care 6 per cent and private schooling 7 per cent. At just 3 per cent inflation, annual spending of 720,000 baht today would more than double to about 1.75 million baht in 30 years.

 

 

 

Longevity is another risk. A 60-year-old Thai can expect to live another 23.5 years on average, and KKP data show a 35 per cent chance that a woman reaching 60 will live to 90.

 

His advice on protecting the plan was to guard against unexpected costs through health and accident insurance. He also cautioned against linking retirement saving only to tax deductions, as annual RMF contributions are usually far smaller than the amount needed.

 

 

Invest early, diversify, de-risk

On investment, Dr Pipat made three points. Start early so returns can compound, and keep investing after retirement, since savings may need to last 20 to 30 years.

 

Reduce risk gradually as retirement approaches. And look beyond Thailand. Thai retirement savings remain heavily home-biased, according to the KKP presentation, with 97 per cent of provident fund assets invested domestically.

 

Thailand accounts for just 0.14 per cent of the MSCI All World index.

 

Over ten years to August 2026, the SET delivered annualised returns of 3.7 per cent, against 13.0 per cent for global equities and 15.4 per cent for the S&P 500.

 

Dr Pipat said US ten-year government bond yields were above 5 per cent, against a little over 2 per cent in Thailand. Currency risk exists, he acknowledged, but is less significant over long horizons.

 

A 20-year plan, he said, should not depend on how the Thai economy performs this year. Gradual de-risking matters, too. KKP’s illustration of a 15-year investment ending at the February 2009 low of the global financial crisis showed a portfolio that was steadily de-risked, ending 25.1 per cent higher than one that was not.

 

The figures are based on index data, not on any fund.

 

 

KKP’s retirement funds

Narit Kosalathip, head of personal investment advisory at Kiatnakin Phatra Securities, said KKP is launching a retirement series that begins with a conversation about each client’s goals rather than a product.

 

The KKP Ready Retire 2045 and 2035 funds, available in ordinary and RMF versions, are managed with Capital Group and shift gradually from growth assets towards income as the target year nears.

 

At maturity, they are due to convert into the KKP Lifelong Income fund, which Narit said aims to pay roughly 4 per cent a year while preserving capital.
 

The KKP Advanced Income fund targets higher payouts of about 5 to 7 per cent, at the cost of drawing down principal. The minimum investment is 1,000 baht. He said the funds do not guarantee capital, and investors may receive less than they put in.

 

Narit said the company aims to reach 30 billion baht in assets over three years but conceded that retirement planning is largely a matter of changing mindsets. “It is not easy,” he said.