Political parties grapple with funding constraints for pension plans in run-up to general election
“Thailand will be a full-fledged aging society this year, as citizens 60 years old and above will represent 20 per cent of the total population,” said Worawan Plikhamin, deputy secretary-general at the National Economic and Social Development Council (NESDC), a state-run think-tank.
Senior citizens will comprise 30 percent of the country’s population in 2037, making the country a super-aging society.
The rising number of senior citizens offer both opportunities and challenges to the country. On the business side, there is scope for growth in healthcare services for the elderly, and more senior citizens may also enter the labour market. On the flip side, an aging society would lead to rise in medical expenses and cost of social services, putting a strain on the country’s fiscal budget in the future.
Currently, the elderly are paid a monthly allowance of between 600 and 1,000 baht, depending on their age. Those aged 60-69 get 600 baht; those aged 70-79 get 700 baht; people 80-89 get 800 baht and those 90 and above receive 1,000 baht.
Some economists and social activists have voiced their support for increasing the pension to the elderly, saying the current payment is too meager and many of the elderly do not have adequate savings. With these in mind, political parties are promising to revise the monthly pension for senior citizens as part of their election campaign for the upcoming general election.
Palang Pracharath Party
The current ruling Palang Pracharath Party has made a bold promise — people aged 60 and above will receive 3,000 baht per month; those aged 70 and above would receive 4,000 baht a month and citizens 80 and above will get 5,000 baht — if it returns to power.
Move Forward Party
The Move Forward Party proposes to increase pension for the elderly to 3,000 baht a month by 2027. The party is taking a cautious approach, realizing the high cost of such a commitment.
In a recent public debate on pension, Decharut Sukkumnoed, director of Move Forward Party’s think tank — the Think Forward Center — estimated that the total cost of raising the pension for 12 million senior citizens would be about 420 billion annually. The party is also proposing a universal child welfare scheme, which will increase the child grant from 600 baht to 1,200 per month. The total cost of the revised elderly pension and child grant would be 650 billion baht.
Decharut said the party has taken into account the source of funding. He said the party sees three ways to finance the schemes:
– Cut military spending or other projects worth about 180 billion baht
– Improve tax collection efficiency, which will yield more than 250 billion baht in revenue
– Increase tax rates
The party is also looking at introducing a wealth tax on people owning assets valued at more than 300 million baht. Land and building tax rates would be raised.
The tax hikes would generate a revenue of 220 billion baht. The sum total of the measures would increase revenue by 650 billion baht, sufficient enough to cover the cost of the proposed child grant and pension for the elderly.
But he added that increasing the pension to 3,000 baht could not be implemented soon after it takes office due to other expenses. Hence, the party has promised to raise the pension within 2027, Decharut said.
The country’s oldest political party is yet to make its position clear on its pension plan. Pisit Leeahtam, chairman of the Democrat policy committee, said the party does not want to commit to a specific amount, as the cost would be as high as 450 billion baht, should each senior citizen get 3,000 baht a month, as the number of elderly is 12 million, expected to hit 20 million in 2040. It is easier said than done to assume funding from a cut in the defense budget and from tax hikes, he said.
He assured that his party would take care of the elderly, including enabling them to continue working for another 10 to 20 years after they reach 60. Service quality of different schemes —social security fund, universal healthcare and government healthcare schemes — should be close to the same standard, he added.
Thai Sang Thai Party
The Thai Sang Thai Party is also proposing a 3,000-baht monthly pension for the elderly, but the scheme would be directed towards needy people.
Bhokin Bhalakula, chief strategist of the Thai Sang Thai Party, said the country had allocated 80 billion baht funds for the elderly in fiscal 2022. The cost will shoot up to 420 billion baht in the near future if each elderly citizen is paid 3,000 baht a month.
However, of the current 12 million senior citizens, at least 1-2 million are former state officials who receive pension from the government, so they have enough savings, but the 10 million do not. He said the 3,000-baht pension should be given to this group, then the total cost will drop to 360 billion baht annually, even assuming the number of senior citizens increases to 20 million in the years ahead.
The next government may need to raise sin tax— excise tax on cigarettes, liquor and beer — as part of efforts to increase revenue to accommodate the additional financial burden. Revenue from the state lottery, increase in licensing fee and concession fee would also be used to finance the pension scheme.
Alternatively, the government could expand the tax base by increasing the value-added tax rate from 7 percent to 10 percent on luxury goods, Bhokin added.
Cooperative approach needed
A top-down policy may not be enough to deal with challenges in demographic change.
Worawan said that all stakeholders, including the public and private sectors, non-government organizations and communities, need to cooperate closely.
“Communities will play a key role in the long-term to take care of the elderly,” she added.
By Thai PBS World’s Business Desk