JSPES, Vol. 41, No. 3 (Fall 2016)
pp. 29–50

Sustainable Social Security Systems:
A Case Study from Thailand

Narumon Saardchom

NIDA Business School, Bangkok

Without increasing contribution rates of the old-age pension, the reserve of Thai social security fund will drop to zero in 2052. The general average premium (GAP) is 23.5 percent, four times larger than the current legal contribution rate, for the study period from 2015 to 2115. If the old-age pension fund is financed by the contribution rate of 23.5 percent, the fund reserve will last until 2115, at which time the contribution rate must be instantly raised to 32.81 percent, the pay-as-you-go (PAYG) cost rate in 2115. The plausible approach is to slowly increase the contribution rate by scaled premium method. For the fund to be sustainable, the increased contribution rates should be implemented in conjunction with extending the retirement age from 55 to 60 and achieving higher investment return. To ensure that the pension benefit will be sufficient for pensioners, the defined-benefit formula should be revised to have a feature that automatically adjusts the benefit to take into account the cost of living.