Thailand’s social security fund faces bankruptcy risk in 30-40 years

The Labour Ministry raised the alarm that the Social Security Fund (SSF) of Thailand is on the brink of bankruptcy, and could be insolvent in 30 to 40 years if there are no changes made to its current policies.

This warning was issued during a meeting between the newly established Social Security Board (SSB) headed by Sustarum Thammaboosadee, an academic from Thammasat University, and officials from the Labour Ministry. The meeting was held to foster ideas and strategies aimed at improving the effectiveness of the nation’s social security policy.

Phiphat Ratchakitprakarn, the Labour Minister, highlighted the urgency of the situation, stating that the SSF is likely to go bust in the next 30 to 40 years unless critical changes are implemented. Among the proposed changes, Phiphat suggested an increase in the fund collection ceiling from 15,000 baht (US$418) to 20,000 baht (US$558) and raising the maximum age of contributing employees from 55 to 60. Additionally, he recommended that the board increase the cap for low-risk asset investments from 60% to 75%.

In terms of higher-risk assets, Phiphat suggested that only those with an investment grade of BBB and above should be considered for investment. The Labour Minister revealed that the Social Security Fund has accumulated around 200 billion baht (US$5.58) so far, collecting approximately 70 billion baht (US$1.9 billion) annually.

“When the fund reaches its peak, which is estimated to be in the near future, the SSF graph might rapidly drop and fall in a “V” shape. So, planning in advance is necessary.”

In the previous year, the SSF generated a profit of 59 billion baht (US$1.6 billion) from investments worth 2.34 trillion baht (US$65 billion). Phiphat proposed that this rate of investment needs to be doubled from 2.4% to 5% to increase annual revenue to 120 billion baht (US$3.34 billion).

“The SSF’s new investment projects must not generate a profit of less than 5% or at least 4% during this and next year.”

Foreseeing potential risks, Phiphat warned that depositing in foreign banks also comes with exchange rate risks. He further advised the new board to discuss additional privileges for fund members – employees under Section 33, former employees under Section 39, and independent workers under Section 40.

Administrative reforms

In response, the country’s first elected SSB has pledged transparency in the Social Security Fund’s administration. This includes promoting live broadcasts of meetings and reducing costs. Ketnakorn Pojanavorapong, SSB spokesperson, insisted that all SSF committee meetings must be broadcast, and the public should have access to information about previous meetings, reported Bangkok Post.

She also highlighted a flaw in the social security law drafted by the Prayut government, asserting it was proposed when the SSF was overseen by a selected panel.

“We, as the first-elected social security committee, hope this will be the start of a change that will see a better quality of life for all people.”