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Pension Plans Misunderstood
Wichit Chantanusornsiri, The Bangkok Post
Thailand
August 8, 2005
Public education will be crucial for the successful implementation of a mandatory savings programme, according to Naris Chaiyasoot, director-general of the Fiscal Policy Office.
"Unless people understand the aims of the programme, the assumption will only be that the scheme represents an additional tax,'' he said.
Authorities have long discussed the need to strengthen the social safety net, as current pension programmes offer payments equal to just 13% of a worker's salary in retirement. But studies show that pension payments of at least 50% of one's last salary are needed to maintain similar standards of living in retirement.
A draft law would establish a national provident fund funded by employers and employees. Preliminary drafts call for contributions of 3% of a worker's salary, with a cap of 15,000 baht a month.
But maintaining a 50% coverage ratio for pension payouts would require a contribution rate of 6% of salaries.
Authorities fear such a high rate would lead many companies with existing provident funds to scrap them in favour of the national fund, which is supposed to complement existing funds, not replace them.
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