The Social Security pension fund still holds more than two trillion baht. It is not running out of money today. Nor tomorrow. That is precisely the problem. Because crises that arrive slowly are the easiest to ignore.
The warning signs ahead are unmistakable. But because the system still appears stable, politicians and the public convince themselves that there is time to spare.
Yet the countdown has already begun.
Every month, millions of Thai workers pay into the Social Security Fund believing it will provide security in old age. They contribute with the expectation that when their working lives end, the system will be there to support them.
The question is whether it will still be strong enough when that day arrives.
Based on current data and assumptions, projections by the Thailand Development Research Institute (TDRI) suggest that around 2037 -- or the next 10 years -- the pension arm of the Social Security Fund will begin to enter the red -- paying out more than it receives in contributions. The fund will then have to draw on its accumulated reserves to meet pension obligations.
By around 2042 -- or just another 15 years from now -- those reserves are expected to start shrinking. Within less than two decades, the pension fund is projected to slip into a deficit.
For now, however, the numbers still look reassuring. But not for very long.
By the end of 2025, the pension fund held assets worth more than two trillion baht and continued generating annual surpluses of around 100 billion baht. But beneath those healthy-looking figures, the foundations are shifting.
The number of new pensioners continues to rise. At the same time, the number of insured workers is nearing its peak and is expected to decline over the next decade.
It is like looking at a full water tank without noticing that the tap feeding it is slowly being turned off while the drain below is opening wider.
Some of these pressures come from forces beyond the Social Security Office's control.
Thailand is ageing. The labour force is shrinking while the elderly population continues to grow. The result is a steadily rising old-age dependency ratio.
But demographics tell only part of the story.
The more troubling pressures come from multiple problems within the social security system itself. The good news is that -- unlike population trends -- these are problems that can be fixed, if there is sufficient political will.
The first weakness lies in the design of the pension system.
Social Security currently offers only one choice: a defined-benefit scheme. Contributions are mandatory, and the returns are fixed in advance. Contributors have little say over how their retirement savings are invested and no opportunity to choose an approach that suits their own circumstances. Meanwhile, the investment risk rests largely with the system itself.
Investment performance is another concern. Over the past five years, the Social Security Fund has generated returns of only around 2-3% a year. By contrast, the Canada Pension Plan Investment Board has delivered annual returns of roughly 9-10%, while Sweden's premium pension system has averaged around 7-8% over the past decade.
Investment returns matter. They are one of the few tools available to cushion the financial impact of an ageing society where pension obligations increase even as the workforce contracts.
The third weakness lies in the governance of the Social Security system: centralisation and a lack of institutional independence.
Investment decisions are currently made by subcommittees within the Social Security Office itself. But the same people wear several hats at once: protecting members' benefits, managing investments and judging whether the fund remains financially sound.
Apart from conflicts of interest, investment decisions are constrained by bureaucratic red tape that leaves little room for flexibility or swift responses to changing conditions.
Equally worrying is the lack of transparency. At present, there are no regular public updates on the fund's long-term health. Without expert assessments being shared openly, contributors are left in the dark. They have little way of knowing whether the fund can keep its promises -- or of holding those in charge to account.
Even if the fund remains solvent, another question demands attention.
Will the pensions be enough to live on?
Across Organisation for Economic Co-operation and Development (OECD) countries, pension rates generally average 50% or more of pre-retirement income, depending on the definitions and salary calculations used. Thailand's Social Security system provides far less -- only about 20% of average earnings before retirement.
The system also offers no protection against inflation. As prices keep climbing, pension payments stretch less and less. The fund may still be paying pensions on schedule, yet many retirees could find that the money simply isn't enough to live on.
Taken together, these multiple challenges suggest that Thailand's response cannot be reduced to simply increasing contributions or boosting pension benefits.
Reform must proceed on three fronts simultaneously: the system's basic rules, structure, and governance.
The first involves gradually adjusting key figures in the social security system to buy time for adaptation, including a gradual increase in contribution rates. Also, pension formulas should reflect longer working lives. Retirement ages should be adjusted to reflect increasing life expectancy.
Some movement has already begun. The contribution salary ceiling is due to increase to 23,000 baht by 2032, while proposals for a Career Average Revalued Earnings, or CARE, formula are under consideration.
The second front is structural reform.
The world of work has changed, and the pension system needs to keep up. One way to do that is to set aside part of each person's contributions in individual accounts that contributors can track themselves. People would be able to see how much they have built up for retirement, rather than simply paying into a system they rarely understand.
Another is integrating the National Savings Fund with Social Security into a single account that follows workers throughout their careers, enabling smoother movement between formal and informal employment.
The third front is governance reform. Without it, the other changes are unlikely to deliver lasting results.
Making investment management an independent body is crucial. Regular actuarial reviews, accompanied by clearly defined corrective mechanisms, should become mandatory. The governing board should also include more independent members with proven investment expertise.
Students of public policy are often reminded that policy is not simply what governments choose to do. It is also what they choose not to do. That observation captures the Social Security dilemma perfectly.
There are only 10 years left to fix the pension system. It may be our last chance for gradual reform. Delay, and the choices will narrow. The costs will rise. Contributors themselves will pay the price.
The countdown has begun. Reforming the Social Security system is not a task to be left to future generations. It is our responsibility. The clock is ticking. Action must start now.
Chakorn Loetnithat is a researcher at the Thailand Development and Research Institute (TDRI).
