Recommendations for the Development of Thailand?s Elderly Welfare System

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Many of us may already be aware that Thai society is moving to become an aging society within the next few years. Some governments in the past have realized this trend and introduced some policies to address the problems that are expected to arise in the future. However, the development of policies and a welfare system for the elderly seems to be fragmented and still not fully ready. Since welfare systems are not yet well in place, coupled with increasing pressure on the national fiscal burden due to the growing proportion of the elderly, Thailand is at risk of facing serious problems in the future if we do not formulate a well-thought-out policy right now. Therefore, in this article, I would like to reiterate my writings for years and want to propose some principles and guidelines for an elderly welfare system in Thailand to help policymakers frame an appropriate policy agenda and measures to tackle the issues.

Medical services to elderly
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Self-reliance rather than dependence on the government

Three main alternative sources of elderly support in which the development of the elderly welfare system could be built on: 1) Children or neighbours of the elderly; 2) Government provision of assistance or funding for elderly care; and 3) Savings schemes encouraging people to save money for their lives after retirement (such as pension funds). The first choice is unlikely to cover all of the elderly in the country. The reasons are obvious ? the family size is getting smaller as most families tend to have fewer children. The nuclear family is not a trend, but is increasingly becoming the nature of the Thai family. The second choice would definitely increase the fiscal burden of the country in the long-run because the proportion of the working aged to the elderly has reduced and Thailand?s tax base is relatively narrow. Such conditions push the government to a difficult position to increase tax revenue to cover the increasing size of elderly care. The main principle in the development of an elderly welfare system should therefore focus on self-reliance rather than dependence on assistance from others. The government should encourage people to save for themselves in their old age. Welfare assistance from the state or support from their children should be a supplementary option, not the main one.

Unfortunately, government policies for elderly welfare seem to lack unity in direction. Although governments have provided incentives to promote long-term savings, such as the establishment of a National Savings Fund and the welfare fund for rice farmers, at the same time, governments have provided monthly allowances for the elderly and plan to increase the monthly amount, despite the fact that this measure will decrease incentives to save in the long term. I have been advising that the monthly allowance for the elderly should be a short-term measure rather than a permanent programme and it should be given only to poor people. However, various governments seem to disagree and continue with this policy due to pressure from elderly groups and concern over governments popularity.

Compulsory savings rather than voluntary

Thailand?s elderly insurance system does not cover all groups of people because the existing scheme is not able to encourage or even force all workers, especially informal workers, to participate and begin their saving for long-term personal care. Nowadays, there is only one social security system,which is compulsory,whereas the Government Pension Fund and the provident fund established by private enterprises are voluntary. Even so, individual contributions to elderly insurance within the social security fund are unlikely to be sufficient. Results from a numbers of studies have found that social security fund expenses will exceed its revenue by the time the insured in the social security system reaches old age. This is the major risk factor to the stability of the fund.

Despite the government putting much effort into encouraging people to save for long-term care - even with the state contributing to the fund for informal workers who voluntarily join the national savings fund, this scheme still lacks the capacity to cover all informal workers and will be unable to see enough savings accumulated to sustain their future livelihood. This is mainly because low-income earners can save only very limited money, while others do not see the significance of long-term savings. Some seem not to have confidence in the system, being unsure as to whether they will have a sufficient pension or not when they retire.

I would propose that a compulsory savings scheme is the most effective way to enable informal workers to save for themselves in the long term. The programme can start from formal workers, such as government officers, workers in state-owned enterprises and entrepreneurs in the formal economy first, and then be extended to informal workers. Government must develop a system in which all people in the country will have personal long-term savings account (probably the same number of people as all who have identification numbers). The system will be a place where people save for their retirement. Such existing systems as social security funds, the Government Pension Fund (GPF) and provident funds can be used as channels to collect saving for all formal workers.

For informal workers or those who are not in the formal economy right now, the government could delegate the task of savings collection to other agencies to help. The collection of savings from taxpayers who are not social security fund members could be assigned to the Inland Revenue Department. A taxi driver or a motorcycle taxi driver could be assigned to the Department of Land Transport, with this savings fund used as a condition for receiving car registration extensions. The government could assign hawkers or street vendors to local government arrangements.

The government should develop a database system to link all personal savings databases with governmental agency databases, and use participation in the compulsory savings scheme as a condition for people to receive government services. Those who do not join the compulsory savings programme will be unable to receive government agency services as easily and comfortably as joiners will. The same condition will apply to services in the private sector, for example by linking this data with the credit bureau so that those who do not save can be black listed. Apart from this compulsory savings measure, in order to prevent avoidance, the government could implement a further measure to help people save indirectly. For example, deducting part of VAT as savings, as all people will pay VAT when they purchase goods and services (the buyer shows the identification card and the collected savings go into their account).

In addition to government contributions, the government should give incentives to people to increase their savings. For example, the government could issue a ?savings lottery? to encourage people to save by giving long-term rewards as incentives or by allowing savings to be used for tax deduction.

Increase savings options and rights for those who save

A major problem that creates dissatisfaction for people who save for their retirement is the inefficiency in administration of the social security scheme. Many scholars and a group of insurers have demanded reformation in the structure and administration of the social security office to alleviate any ineffectiveness and inefficiency of fund management. In one case,for example, government officers who were members of the Government Pension Fund (GPF) complained about the administration of GPF because it offered low returns.

Another problem that has been little discussed is the discontinuity of savings programmes. This is so that those who save for the long term in any system can stop saving. For example, when the insured in a social security system are out of work they might stop contributing to the fund. In so doing, they will not be covered by the social security system and will no longer be eligible for any social security benefits. Also, those who save in the providence fund may stop their contribution voluntarily, or when someone changes their workplace, they may also stop saving if the new workplace has no provident scheme.

I would like to propose that a long-term savings system be designed to create wide options for people. Where the long-term savings of formal workers are administered only by the Social Security Fund or the Government Pension Fund in the case of government officials, instead it should not be fixed. People who save should have the right to choose where they want to save and which way they prefer to manage their savings. The government should open wide opportunities for other agencies, particularly those from the private sector, to compete and participate in the saving schemes. The government should administrate the rules and regulations of the scheme in order to protect people?s savings and prevent the withdrawal of their savings before they retire. Moreover, people who save should have the right to manage their investment portfolio, or be able to partially manage their own savings. Such a new practice as this would decrease people?s dissatisfaction in the management of their savings.

Contributions from the state should be varied inversely to people?s income

At present, some debate remains between different groups of people in the system as to the fairness of their social security scheme contributions. For example, informal workers do not receive contributions from the government, while formal workers do. On the other hand, informal workers under Universal Health Care do not need to pay for medical treatment.However, formal workers must pay a contribution toward medical treatment under the social security system. At the same time, government officials who save with the Government Pension Fund may feel they are being treated unfairly because their pensions are less than those who are not members of the GPF.

To solve such issues, the government does not need to establish an equal contribution for everyone. Instead, people of the same or similar economic status should contribute to the system at the same amount level and this should be inversely varied according to the level of income or the economic status of participants, which means that the contribution of the poor should be less than that of the rich. The individual contributions of people should be subject to other factors that signify their incomes or economic status. In other words, the poor or low-income people should receive a higher amount of contribution from the government than the rich or those with high income.

For this reason, I advised that the government set in place a minimum savings threshold for people to have a sufficient pension when they retire. People on high income who are able to save may not necessarily receive a contribution from the government. However, unskilled workers or informal workers on low incomes should receive a higher level of contribution from the government than other groups, so that they can accumulate savings to a minimum threshold level.

The development of long-term savings as security for the elderly in Thailand is still in its early stages. Many problems have occurred and need to be resolved in order to make different systems equal, fair, stable and sustained. To design an effective, comprehensive and sustainable system is a challenging task for the government. It will require the integration of all existing systems and structures in order to support this new welfare system.Moreover, creativity is needed more than ever before in the past for designing of the system.