In 2009, the Head of HelpAge International’s programmes in the Asia-Pacific region presented the case for universal age pensions in Thailand.
Many countries across the globe have begun introducing “social pensions” in order to assure a minimum standard of living for older people. These pensions are non-contributory and are funded from general taxation. One example is Thailand’s Old Age Allowance (OAA) which gives around US$15 per month (500 baht) to the poorest older people [from age 60]. ….
While a pension targeted at the poorest – such as the Thailand’s Old Age Allowance – will have some effect, there are important advantages to a more universal approach of giving a pension to all people over a certain age. A universal pension is simple to implement as the only eligibility criteria is a person’s age. In comparison, the challenges of targeting to the poorest in society are often underestimated and problems such as lack of information and fraud mean that many of those who should receive a benefit are often left out. In Chile, the targeted PASIS pension which was hailed as a relative “success story” only reached 16% of those at which it was targeted. It has now been replaced as part of a move to a more universal system.
Meanwhile, there are significant added benefits to a universal pension. Not only do they reach more older people and thus have a greater impact on economic development, but they can have a transformative effect on society as a whole. Assuring that everyone in the country will have access to a pension in old age is a way in which a government can demonstrate a fair and equal approach to all members of society. ….
The biggest concern often voiced about a universal pension is that of affordability. However, even in countries where there is a rapidly ageing population the cost of pensions is surprisingly low. In recent months, the Sri Lankan government has been considering the potential for implementing a universal pension. A recent feasibility study revealed that a pension giving around US$27 per month to everyone over 70 would cost only 0.8% of GDP. This is equivalent to less than 5% of current government expenditure and could be covered by a small increase in VAT. ….
In Thailand, initial estimates suggest that a universal pension giving around 1,500 baht per month to everyone over 65 would cost only 1.2% of GDP. Even with only a modest economic growth this figure would not increase.
Dharmapriya Wesumperuma, “‘Social pensions’ ensure income security in old age”, Bangkok Post, 20 January 2009.
Thailand’s social pension is still a modest 500 baht, and is not yet universal. But, shortly after publication of this article, the government transformed its poverty-targeted Old Age Allowance into a Universal Minimum Pension. Today, every resident over the age of 60 who has no other pension income receives a monthly benefit of 500 Baht (15 US$). The pension reaches 73% of Thailand’s age-qualified elderly, at a cost to taxpayers amounting to 0.33% of GDP. This is a good beginning for the country. Pension-testing is preferable to other types of income- and asset-tests because it is easy to administer, does not stigmatize recipients, and does not penalize those who live from savings, receive transfers from adult children or work for wages in their old age.
Source: Pension Watch, “Country Fact Sheet: Thailand”. Accessed 20 March 2011.
Tags: targeting
