Savings scheme to help save elderly from destitution

Much of the problem stems from the sad fact that the majority of Thais have long worked in the unregistered sector with very limited access to state-backed retirement benefits. Although the government offers a monthly subsidy for all Thais aged over 60, the amount is meagre. It ranges between just Bt600 and Bt1,000 – something that cannot cover real living expenses. 

So it’s heartening to hear the government’s decision to start the National Savings Fund (NSF) scheme this coming June.

The NSF is Thailand’s first retirement savings scheme to help Thais working in the unregistered sector. Among them are farmers, freelancers and odd jobs workers who have long contributed to the country’s economy but with little notice or recognition. 

Once launched, the NSF will open a retirement-savings account for any Thai working in the unregistered sector and aged at least 30 years old. At present, there are some 30 million people earning a living in this long-ignored sector. 

How will the NSF improve the retirement life of these people? 

Through the NSF plan, when workers put a sum of money in their accounts, the government will put an amount of money in each account too. The contribution from the government will increase in response to the amount they save through their NSF account and also according to their age. The older they are, the higher the contributions from the government will be. The government will spend about Bt20 billion each year to support implementation of the NSF. 

Employees in private companies and civil servants have long had access to schemes with retirement benefits, through the Social Security Fund (SSF) and the Government Pension Fund respectively. Some company employees have even enjoyed provident funds.

Although the SSF is open to people outside company contracts, it is not popular among them. In addition, the SSF is not solely about retirement. It is about using money to buy various forms of security including health benefits and unemployment benefits. 

Thailand’s need to encourage people to save money for their retirement is now stronger than ever because pretty soon the country will be an ageing society. It is now estimated that about 14.4 per cent of Thais will be over 60 years old by 2020. If a very high percentage of elderly Thais remain without any retirement savings, then not just individuals but the country overall, will suffer. 

Saving money for one’s retirement is important because no one is fit for work forever. The official retirement age in Thailand is 60 years, while Thais’ average life span is 71.1 years for men and 78.1 years for women. So, how can one live without earning any income during the retirement years? 

The majority of Thais may not yet be familiar with the concept of saving money for their retirement. Many still believe they need to worry first about filling their hungry stomachs. They believe tomorrow will take care of itself. Some hope they will be able to rely on their children or grandchildren later on. 

The truth, however, is that many elderly struggle to make ends meet on their own. Without savings, they lack security in their lives. 

The National Economic and Social Development Board (NESDB) found that 42 per cent of elderly did not have enough income to support themselves. 

This corresponds to the findings of a 2012 survey by the National Institute of Development Administration (NIDA), up to 72 per cent of respondents did not have any savings. 

According to a Towers Watson’s 2013 report, Thailand’s pension assets to gross domestic product (GDP) stood at 19 per cent only. That is little when compared with Singapore’s 65 per cent and Japan’s 62 per cent. Even Malaysia’s pension assets to GDP stood at 50 per cent. 

The NSF will prove a good solution. When promoted, it should be able to nudge millions of Thais to start saving for their retirement. The savings won’t cause people any burden because they can put in just a little each month.

But little by little, such savings can grow into an amount big enough to make them feel more secure when income stops coming.