The government's attempt to revise a law to let subscribers withdraw part of their pension before they turn 55 does not bode well for the sustainability of the Social Security Fund -- the country's largest welfare scheme.
The move isn't just an irresponsible, populist move -- it shows how clouded the government's judgement is when it comes to managing social welfare and pensions.
Despite academic experts and some government ministers warning the government to abandon the idea, on Tuesday, the cabinet went ahead and amended a draft of the Social Security Act, as proposed by the Labour Ministry.
The draft will now be vetted by the Council of State, and parliament is expected to decide on the matter in the next House session.
If approved, subscribers who meet certain conditions will be able to withdraw parts of their pension from the Social Security Fund before they reach the age of 55.
Not all aspects of the amendment are negative. For example, the changes will give subscribers more leeway to choose the benefits they want. It will also see increased assistance for disabled subscribers. Members will also be able to use their pension as collateral for a loan, a policy that the Labour Ministry touted as a tactic to counter loan sharks.
The amendment is the brainchild of Labour Minister Suchart Chomklin, a Palang Pracharath Party MP. His ministry oversees the Social Security Office, which in turn manages the SSF -- the nation's largest welfare fund with assets worth around 1.4 trillion baht. Last year, the fund recorded profits from various investments amounting to 834 billion baht.
During the pandemic, the Labour Ministry was pressured by some groups to allow SSF subscribers to withdraw their pension in lump-sums to alleviate their financial hardship. According to the current version of the Social Security Act, subscribers can only withdraw their pension money after they turn 55.
While the amendment was initiated out of goodwill, its repercussions could outweigh its benefits.
It is expected at least five million SSF subscribers will make a partial withdrawal if the amendment is passed. If each member were to withdraw 30,000 baht, the fund will have to pay out 150 billion baht -- money which could otherwise be invested to generate more profit for the benefit of subscribers.
While the government has the obligation to help its citizens in times of economic crisis, it has done so by borrowing vast amounts of money to fund various economic stimulus programmes.
No one would be surprised if the government decides to borrow some more, but it has to remember the SSF isn't a bank it can exploit. The fund was created to cover medical costs, provide compensation for workers and ensure the welfare of the elderly.
The International Labor Organization had warned that past examples have shown that countries which allowed their welfare fund subscribers to withdraw their pension funds in one go used up their welfare reserves within 5-10 years. Once the reserves run out, it warned, members will go back to relying on the state's help.
Hopefully, the government will reconsider the decision. What it needs to do instead, is find a mechanism through which it can better channel assistance to those who need it the most.
Instead of trying to break into the SSF's coffers, Labour Minister Suchart should do the opposite. He should aim to make the SSF more sustainable by expanding its subscriber base to increase overall contributions to the welfare fund.
