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Saving for Retirement





Ageing Society

The world is growing older. So is its population, resulting in increasing demographic and economic pressure on the ageing society. Among other things, advanced medical science and successful family planning have contributed to a longer life expectancy and lower fertility rates. As a result, an average age of the global population is 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.

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 six working-age (15-59) citizens to one elderly in 2005 and three to one in 2025.

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

       Population Trend 

 *Reference: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2004 Revision and World Urbanization Prospects: The 2003 Revision, http://esa.un.org/unpp


The Multi-Pillar Theory of the World Bank

The World Bank has divided saving 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 the public and private sectors make contributions; the public sector manages the fund and 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 the private sector is 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 endorsed by the public sector 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 obligations to the society, which may translate into decreased or limited benefits for savers. To compensate for the 1st Pillar insufficiency, the 2nd and 3rd Pillars should be implemented to ensure quality living for all citizens.

Thailand Overview                                                                                                                          

                                Social Security Fund

                                Government Pension Fund

                                Retirement Mutual Fund

                                Provident Fund


                                National Pension Fund


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Last update : April 5, 2006

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