Impact of the National Pension Fund on the Suitability of Elderly Pensions in Thailand* 

Authors


  • * 

    Pfau (corresponding author): National Graduate Institute for Policy Studies, 7-22-1 Roppongi, Minato-ku, Tokyo 106-8677, Japan. Email: wpfau@grips.ac.jp. Atisophon: National Graduate Institute for Policy Studies, 7-22-1 Roppongi, Minato-ku, Tokyo 106-8677, Japan. Email: vararata@hotmail.com. We would like to thank Deputy Secretary General Singha Nikornpun and other officials at the Government Pension Fund of Thailand, as well as officials from the Fiscal Policy Office of the Ministry of Finance in Thailand, for their helpful assistance in understanding the pension reform proposals being discussed in connection with the National Pension Fund. Also, we gratefully acknowledge the comments and suggestions of participants at the 6th Meeting on Social Security and Complementary Pensions Systems in Lisbon, Portugal, the Alternative Investments Asia meeting in Hong Kong, and at an IMF Asia-Pacific Office seminar. We also thank two anonymous referees from the Journal for their helpful comments and suggestions.

Abstract

This study combines a traditional hypothetical worker approach with the techniques of stochastic forecasting to provide a better sense about the suitability of the pension system for formal sector private workers in Thailand. With regard to the proposed defined-contribution pension, we find that workers with a 40-year career can only expect a median replacement rate of approximately 13–14 percent of their final 5 years of income. Most of the pension benefits will still likely come from the unsustainable defined-benefit pension system and further reforms will be needed to maintain suitable pensions.

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