Retirement Age Extension For Civil Servants Mulled: Thailand

[webfact]

AGEING

Retirement age extension mulled

Achara Deboonme

Chularat Saengpassa

Pongphon Sarnsamak

The Nation

Civil servants may be kept in the workforce from 60 to 62 to alleviate the problems of an 'ageing' society

BANGKOK: -- By 2050, when Thailand's population is expected to total 82.5 million, according to the UN's "World Population Ageing: 1950-2050" report, the number of elderly Thais - those aged 60 or older - is projected to reach 22.5 million, or 27.3 per cent of the population.

With more people reaching retirement age and a declining fertility rate leading to fewer young workers, this situation will affect all sectors, particularly Thailand's civil service, which is the "back office" of the main engines driving the Kingdom's economy.

According to the secretary-general of the Office of the Civil Service Commission, Nontikorn Kanjanajitra, this issue is of great concern and must be addressed urgently if public services for all Thais are not to decline in the decades ahead.

"This has been our concern for years, as the average age of civil servants hit 45 years for the first time in 2004," Nontikorn said in an interview last week. The average dropped recently to 43, thanks to the retirement of those members of the "baby boomer" generation. Yet, the situation remains worrisome, taking into account higher life expectancy and lower fertility rates.

More than 2.7 million people now work for the civil service in some capacity, comprising officials in 19 ministries whose salaries are part of the central government budget. Of the 1.65 million with full civil-servant status - qualifying for full benefits - only 42.2 per cent are aged below 40 years. (See graphic.)

The Civil Service Act was amended in 2008 to extend the retirement age by up to 10 years from 60 for civil servants with needed technical or other individual skills - medical and legal, for example. Their retirements will be delayed by four years, with two three-year renewals possible.

Nontikorn said his office is also studying a plan to extend the retirement age of civil servants in other areas. The study, which kicked off about a year ago, is expected to be completed this month and will be presented to the government next year. In the preliminary stage, two options are being considered.

First, the 70-year threshold could be applied to experts working in other fields to address shortages.

Second, the threshold in all fields could be extended from 60 years to 62 years. This may exclude those who do not hold at least a bachelor's degree. Also, for certain positions such as soldiers and police officers, there may be a physical requirement.

"Two benefits from this would be that [the workers'] expertise is retained, and the pension burden would be reduced," Nontikorn said.

In Japan, which has a higher percentage of its population in the elderly range than any other country, the retirement age will be raised to 65 next March, while companies are allowed to pay half-salary to employees aged 60 or more.

Professor Naohiro Ogawa of the Nihon University Population Research Institute said earlier that the extension of retirement age is necessary; no country in the world, Ogawa said, can leave their retirement age unchanged for decades as life expectancy increases. Ogawa noted that if more people are kept in the workforce, their contributions help reduce the government's pension burden, making the pension scheme more sustainable.

Mathana Phananiramai, a former lecturer at Thammasat University who has studied the impact of the ageing population, added that older retirement age would help ensure that retirees have more savings.

Under the Pension Act, Thailand's retirement age has been fixed at 60 years since 1941, when Thais' life expectancy was just 52. Thanks to advances in medicine and other technologies, life expectancy is now 72. Meanwhile, Thailand's fertility rate is well under one, meaning less than one child is born to every couple. Without contributions from those who can still make them, the government is also shouldering extra healthcare expenses on civil servants and retirees, as well as their family members.

About 5 million people are now eligible for the medical services under the Civil Servant Medical Benefit Scheme, according to Health Insurance System Research Office (HISRO) head Dr Samrit Srithamrongsawat. About half are aged over 60, consuming about half of total expenses, which stand at Bt60 billion per annum.

Nontikorn said the burden would only rise as the ageing population demands more healthcare services. This will require more staff, buildings and utility expenses. In addition, the Thai public service will face a human-resource shortage, particularly in the medical area.

"The age gap will only widen, as many civil servants age while we freeze the workforce periodically. We need to seriously rethink the recruitment rules. There must be incentives to facilitate the return of the recently retired to the public service," he said.

-- The Nation 2012-12-03

[Stradavarius37]

Been wondering when this would happen. Forced retirement at 60 has always seemed a bit silly.

[jaltsc]

I thought Thai civil servants retired as soon as they bought their position

[chainarong]

Its happening everywhere else, Oz pension is now 67 for men born after 1953, you can actually die at your work place, I know guy's in their eighties still working.

[otherstuff1957]

I used to teach at a big government school. The average age of the teachers there was about 50. Something like 40% of the teacher were due to retire within the next 5 years (about now, in fact). In order to prevent a crisis, they are really going to have to raise the age of retirement.

[Arkady]

For the private sector the Social Security Fund will not have enough to pay their measly pensions. Better increase the age for drawing that, so it will take longer for the incompetence and embezzlement to be discovered.

[northernboy]

I thought Thai civil servants retired as soon as they bought their position

No when they sell their position!

[Keesters]

If the old keep working where are the jobs for the young?

[bridge2bridge]

I thought Thai civil servants retired as soon as they bought their position

I LIKE this comment.

[Jaidii]

I used to teach at a big government school. The average age of the teachers there was about 50. Something like 40% of the teacher were due to retire within the next 5 years (about now, in fact). In order to prevent a crisis, they are really going to have to raise the age of retirement.

A win-win situation. If there's a shortage of new teachers you'll find a number of 'retirees' will draw their pension and carry on teaching.

[Rhys]

Interesting.... would this same concept apply to western teacher at that age level?

[sirchai]

Civil servants may be kept in the workforce from 60 to 62 to alleviate the problems of an 'ageing' society

Then from 62 to 65, then from 65 to 67 as in some European countries?

[EarthAlien]

They are doing this the world over now.

Governments are awake to the fact that the Baby Boomer generation will be retiring soon and there is not enough funds to provide for them in old age and not enough younger workers to take up the slack.

Solution:

1) raise the retirement age to reduce payments and in the hope that the added stress will kill more off earlier!

2) raise taxes

Meanwhile governments continue to raid and mismanage pension funds that were originally meant to be untouchable.

[soomak]

They are doing this the world over now.

Governments are awake to the fact that the Baby Boomer generation will be retiring soon and there is not enough funds to provide for them in old age and not enough younger workers to take up the slack.

Solution:

1) raise the retirement age to reduce payments and in the hope that the added stress will kill more off earlier!

2) raise taxes

Meanwhile governments continue to raid and mismanage pension funds that were originally meant to be untouchable.

Indeed the retirement age is on the rise in many countries, and rightly so.

What they should do if the want to avoid a crisis in 10 or 20 years, is to cancel the government funded pensions, and to make it mandatory for all employees to save some of their salary in a pension fund.

For example: the employee must pay 10% and the employer another 10%, so that 20% of your salary are put into the fund each year, and after 40 - 45 years of work + all the interest on the funds, people can have a descent pension.

Currently it's like a pyramid scheme - as long as there are enough tax payers - they pay the pensions for the retirees, when the number of retirees will reach a certain number, the money will run out.

[Rajab Al Zarahni]

They are doing this the world over now.

Governments are awake to the fact that the Baby Boomer generation will be retiring soon and there is not enough funds to provide for them in old age and not enough younger workers to take up the slack.

Solution:

1) raise the retirement age to reduce payments and in the hope that the added stress will kill more off earlier!

2) raise taxes

Meanwhile governments continue to raid and mismanage pension funds that were originally meant to be untouchable.

The baby boomer generation, or indeed the bulge they create in the population profile, are not responsible for the pension funding crises throughout the world. The main causes of the problem are that of increasing longevity and decreasing mortality and these are factors that all generations are benefiting from. If anyone is blameworthy it's the chartered actuaries, who are paid hefty salaries to predict such difficulties well in advance and thereby enable governments and pension scheme administrators to take timely remedial action.

[Rajab Al Zarahni]

They are doing this the world over now.

Governments are awake to the fact that the Baby Boomer generation will be retiring soon and there is not enough funds to provide for them in old age and not enough younger workers to take up the slack.

Solution:

1) raise the retirement age to reduce payments and in the hope that the added stress will kill more off earlier!

2) raise taxes

Meanwhile governments continue to raid and mismanage pension funds that were originally meant to be untouchable.

Indeed the retirement age is on the rise in many countries, and rightly so.

What they should do if the want to avoid a crisis in 10 or 20 years, is to cancel the government funded pensions, and to make it mandatory for all employees to save some of their salary in a pension fund.

For example: the employee must pay 10% and the employer another 10%, so that 20% of your salary are put into the fund each year, and after 40 - 45 years of work + all the interest on the funds, people can have a descent pension.

Currently it's like a pyramid scheme - as long as there are enough tax payers - they pay the pensions for the retirees, when the number of retirees will reach a certain number, the money will run out.

What they should do if the want to avoid a crisis in 10 or 20 years, is to cancel the government funded pensions, and to make it mandatory for all employees to save some of their salary in a pension fund.

Were you speaking of Thailand or the UK or elsewhere?

[rubl]

They are doing this the world over now.

Governments are awake to the fact that the Baby Boomer generation will be retiring soon and there is not enough funds to provide for them in old age and not enough younger workers to take up the slack.

Solution:

1) raise the retirement age to reduce payments and in the hope that the added stress will kill more off earlier!

2) raise taxes

Meanwhile governments continue to raid and mismanage pension funds that were originally meant to be untouchable.

The baby boomer generation, or indeed the bulge they create in the population profile, are not responsible for the pension funding crises throughout the world. The main causes of the problem are that of increasing longevity and decreasing mortality and these are factors that all generations are benefiting from. If anyone is blameworthy it's the chartered actuaries, who are paid hefty salaries to predict such difficulties well in advance and thereby enable governments and pension scheme administrators to take timely remedial action.

Personally I think the information provided by chartered actuaries as you call them is more likely to be heeded to and used to modify policies by commercial companies like Insurance Companies than in a Ministry or even a Government. In most countries politics covers the next 12 months, maybe even the next 48 months, but difficult decisions tend to be watered down to small 'politically manageble' steps which mostly translates to 'enough to be seen doing something, and not too much to upset too many'.

Edited December 5, 2012 by rubl

[Rajab Al Zarahni]

They are doing this the world over now.

Governments are awake to the fact that the Baby Boomer generation will be retiring soon and there is not enough funds to provide for them in old age and not enough younger workers to take up the slack.

Solution:

1) raise the retirement age to reduce payments and in the hope that the added stress will kill more off earlier!

2) raise taxes

Meanwhile governments continue to raid and mismanage pension funds that were originally meant to be untouchable.

The baby boomer generation, or indeed the bulge they create in the population profile, are not responsible for the pension funding crises throughout the world. The main causes of the problem are that of increasing longevity and decreasing mortality and these are factors that all generations are benefiting from. If anyone is blameworthy it's the chartered actuaries, who are paid hefty salaries to predict such difficulties well in advance and thereby enable governments and pension scheme administrators to take timely remedial action.

Personally I think the information provided by chartered actuaries as you call them is more likely to be heeded to and used to modify policies by commercial companies like Insurance Companies than in a Ministry or even a Government. In most countries politics covers the next 12 months, maybe even the next 48 months, but difficult decisions tend to be watered down to small 'politically manageble' steps which mostly translates to 'enough to be seen doing something, and not too much to upset too many'.

The pension scheme actuaries were those with the principle duty of alerting governments and pension schemes to the dangers. They raised no such concerns, largely because, like most people in the finance industry, they were obsessed with the performance of the markets to the exclusion of all other factors, principally changes in longevity and mortality. I agree generally with what you say about short term thinking by governments. Pensions policy needs very long term planning and governments have wreaked havoc over the years by endless tinkering. Pension legislation in the UK is now so hideously complicated that pension experts barely understand it and this is despite recent root and branch reform.

[soomak]

They are doing this the world over now.

Governments are awake to the fact that the Baby Boomer generation will be retiring soon and there is not enough funds to provide for them in old age and not enough younger workers to take up the slack.

Solution:

1) raise the retirement age to reduce payments and in the hope that the added stress will kill more off earlier!

2) raise taxes

Meanwhile governments continue to raid and mismanage pension funds that were originally meant to be untouchable.

Indeed the retirement age is on the rise in many countries, and rightly so.

What they should do if the want to avoid a crisis in 10 or 20 years, is to cancel the government funded pensions, and to make it mandatory for all employees to save some of their salary in a pension fund.

For example: the employee must pay 10% and the employer another 10%, so that 20% of your salary are put into the fund each year, and after 40 - 45 years of work + all the interest on the funds, people can have a descent pension.

Currently it's like a pyramid scheme - as long as there are enough tax payers - they pay the pensions for the retirees, when the number of retirees will reach a certain number, the money will run out.

What they should do if the want to avoid a crisis in 10 or 20 years, is to cancel the government funded pensions, and to make it mandatory for all employees to save some of their salary in a pension fund.

Were you speaking of Thailand or the UK or elsewhere?

It's probably the same for most countries where there are government funded pensions, I am not an expert on the UK or Thailand, it is just common sense.

In my home-country (Israel) they increased the retirement age to 67 + canceled the government funded pensions for new employees (that was in 2002). They still have a problem with the pensions of the older employees which the government is responsible for.

If I was a 50-60 years old guy who is looking forward for a nice government pension till I'm 85, I would be worried.

Better to save some money on your own.