Is the proposed lottery pension scheme a populist gamble?
Thailand is now officially an aged society, with the number of people aged over 60 reaching 13 million, making up around 20 per cent of the total population. An aged society comes with rising welfare cost for the economy.
A previous survey by the Stock Exchange of Thailand found, alarmingly, that 31.3 per cent of the aged group do not have savings for retirement, while 53 per cent had savings of less than 200,000 baht each.
Aware of this brewing crisis, the Finance Ministry has made plans to raise funds to support workers, especially those in the informal sector, by launching a pension lottery scheme.
What is the pension lottery?
Deputy Finance Minister Paopoom Rojanasakul described the pension lottery scheme as the best tool to attract the attention of a large number of local workers.
Thais are usually addicted to both government and underground lotteries.
The National Savings Fund (NSF), the retirement savings vehicle for workers in the informal sector, will issue digital lottery tickets priced at 50 baht each.
Lottery draws will take place every Friday at 5pm. Big lottery prizes include five first prizes of 1 million baht each, and 10,000 second prizes of 1,000 baht each.
“The prizes would be funded by the government budget, with costs estimated at 15 million baht a week, or 700 million baht annually, which is a very small sum of money compared with the current 400-500 billion baht cost of the pension fund,” Paopoom said.
Those who do not win the ticket prizes will not lose their investment, as it will turn into their savings. The savings will be managed by the NSF.
Members will be allowed to withdraw their accumulated funds when they reach the age of 60 years.
Those eligible to buy pension fund lottery tickets include NSF members, those insured under the Social Security Section 40, and other informal workers. Individuals can purchase up to 3,000 baht worth of tickets per month.
The scheme is expected to cover 16-17 million people, according to Paopoom.
The details of the scheme could be changed later as the Finance Ministry would take 6-12 months to establish the fund.
Not biting the tax bullet
The government needs to change laws and regulations related to the operation of the NFS, Paopoom said.
The government approach is different from a recommendation made by many economists. Most local economists and those at the World Bank have long called for tax reform.
For example, the government could increase value-added tax from 7 per cent to 10 per cent, or raise tax rates on land and property or inheritance.
But a tax hike is unpopular among the public, and politicians in power worry that the unpopular move could lead to them losing power in the next election.
Thailand has run fiscal deficits for several years, as tax revenue is just about 15-16 per cent of gross domestic product (GDP) while the cost of social welfare is increasing.
The country is in urgent need of finding ways to raise its tax revenue.
Currently the country relies on tax revenue derived from consumption while tax collections on wealth are far lower.
For example, value-added tax revenue is estimated at 915.7 billion baht compared with inheritance tax receipts of about 800 million baht for fiscal year 2024.
Few people pay personal income tax each year: the amount is estimated to be 414.8 billion baht for fiscal 2024.
Promoting gambling?
Though the government lottery is being considered as a tax, many people are also worried about the social fallout from the new scheme, wondering if it would encourage people to gamble.
Paopoom defended that scheme, and rejected fears that it would encourage gambling, arguing that the lottery ticket purchases would turn into savings.
The scheme suits the typical behaviour of Thai people, who love to take risks, he said.
Potential to fail
Critics are sceptical about the planned pension lottery.
“The scheme is unlikely to be successful because Thai household debt is very high,” said Anusorn Tamajai, director of Digital Economy, Investment and Trade Research Center at the University of the Thai Chamber of Commerce.
The current household debt is 91 per cent of GDP. Most people do not have adequate income for savings for retirement as they live on debt, especially those who work in the informal sector.
He urged the government to reform the economy and the social welfare system instead of relying on populist policies.
He said making the social welfare system suitable for all ages is important. Compulsory savings should be in line with government finance stance.
The government should try to expand the base of the worker insured under the Social Security Fund’s Section 40, he suggested.
The government needs to develop a basic income system that would ensure the well being of all people. Workers should be allowed to participate in the social welfare development system. They should have right to organize trade unions. People should be able access to natural resources equally, he added.
By Thai PBS World’s Business Desk
