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Saving for retirement

Ageing Society

            In these days, the world’s population is growing older. This circumstance has resulted in an intensifying demographic and economic pressure on the society. Among other things, advanced medical sciences and family planning have contributed to a longer life expectancy and lower fertility rates. As a result, an average age of the global population is getting higher while the elderly population is proliferating. In Asia, senior citizens aged 60+ accounted for 9% of the total population in 2005. The percentage is likely to reach 15%, or almost double, in the next 20 years. This upward trend is even more remarkable in Europe and Japan, which recorded respectively 21% and 26% increases in the over-sixty-year-old population in 2005. More aggressive rises of 28% in Europe and 35% in Japan are expected in the next two decades.

           Like other countries, Thailand is no exception. In 2005, the elderly accounted for 10% of the total population and will probably rise to 20% in the next 20 years. This means a ratio of 6 working-age (15-59) citizens to 1 elderly in 2005 and 3 to 1 in 2025. 

           To alleviate the next generations’ burdens and the government’s obligations, the public must be made aware of, and keen in, saving for retirement if the secured future living is a public goal. 

           Population Trend

*Reference: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat

The Multi-Pillar Theory of the World Bank

The World Bank has divided savings for retirement and pension schemes into categories, collectively known as,

“The Multi-Pillar System”:
  • 1st Pillar: Publicly Mandated, Publicly Managed, Defined Benefit
              A mandatory scheme for which both government and workers make contributions; the public sector manages the fund as well as defines member benefits.
              In Thailand: The old-age benefits under the Social Security Fund
  • 2nd Pillar: Publicly Mandated, Privately Managed, Defined Contribution
              A mandatory scheme where workers are mandated to save income to secure post-retirement living through individual accounts; the private sector manages the fund.
             In Thailand: The Government Pension Fund with exclusive coverage for government officials. In the meantime, the Ministry of Finance is proposing the National Pension Fund scheme for the private sector.
  • 3rd Pillar: Privately Mandated, Voluntary Savings, Defined Contribution
              A voluntary scheme for individual account funds managed by the private sector and supported by the government through tax incentives.
              In Thailand: Provident funds and retirement mutual funds.

The “Three-Pillar System” provides a safety net for life after retirement. However, relying on the 1st Pillar alone is not enough considering the rising costs of living and the government’s increasing responsibilities to the society, which may translate into decreased or limited benefits for savers. To compensate for the 1st Pillar’s deficiency, the 2nd and 3rd Pillars should be implemented to ensure a quality living for all citizens.

Thailand Overview
last updated date 04/05/2553

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