Options mulled to limit state’s pension fund burden

The Finance Ministry is figuring out ways to limit the fiscal burden of the state’s future pension payments to Government Pension Fund (GPF) members.

Among the possible options are higher contributions from fund members and lower pension payments for the non-contribution benefit plan.

The contribution rate of members to the GPF could be raised to 5%, 7% or even 10% from 3% currently, while pension payment under the non-contribution benefit plan could be trimmed to up to 50% of the average salary from a maximum of 70% at present, said an informed source at the ministry.

The government’s matching contribution to GPF members will also be increased in line with higher contributions from members. It now contributes 3% to GPF members.

With higher contributions to the GPF bundled with lower pension payments to the non-contribution benefit plan, the sum of money pension fund members will receive after retirement will be similar to the current level, the source said.

There are around 1 million GP F members.

The contributions and benefits of other countries’ pension funds average 15% of salary, providing money for post-retirement life.

Life expectancy of the world’s population averages 70-75 at the moment.

To adjust the GPF requires a legal amendment, said the source. The new pension structure, if it comes into force, will be applied only to new members to prevent affecting current state officials, said the source.

GPF regulations state its members who retire and have at least 25 years of service can opt to take either a pension or gratuity on top of their contribution and benefits.

The pension provides a monthly amount at a rate based on service duration multiplied by the average salary for the final 60 months of work, divided by 50, but the pension must not exceed 70% the state official’s final salary.

The gratuity provides an amount calculated from the final salary multiplied by the service period.

In fiscal 2016 fiscal, the government set a budget for state officials’ pensions and gratuities of 175 billion baht. The amount was increased to 179 billion this fiscal year.