Is the Proposed Lottery Pension Scheme a Populist Gamble?
Thailand has now entered the realm of an aged society, with individuals over 60 comprising about 20% of the population, equating to 13 million people. This demographic shift is straining the economy with rising welfare costs.
A survey by the Stock Exchange of Thailand revealed a concerning statistic: 31.3% of the elderly lack retirement savings, and 53% have savings of less than 200,000 baht each. To address this looming crisis, the Finance Ministry has introduced a pension lottery scheme aimed at raising funds to support workers, particularly those in the informal sector.
What is the Pension Lottery?
Deputy Finance Minister Paopoom Rojanasakul described the pension lottery scheme as an effective way to capture the interest of many local workers, given Thais’ penchant for lotteries. The National Savings Fund (NSF), which aids informal sector workers in retirement savings, will offer digital lottery tickets at 50 baht each. The draws will be held every Friday at 5 pm, with substantial prizes such as five first prizes of 1 million baht each and 10,000 second prizes of 1,000 baht each.
“The prizes will be funded by the government, costing about 15 million baht weekly or 700 million baht annually, a minor expense compared to the current 400-500 billion baht pension fund cost,” stated Paopoom.
Those who do not win will have their ticket purchases converted into savings managed by the NSF, which can be withdrawn upon reaching 60 years old. Eligible buyers include NSF members, those insured under Social Security Section 40, and other informal workers, with a purchase limit of up to 3,000 baht per month. The scheme aims to cover 16-17 million people, with details subject to change as the Finance Ministry establishes the fund over the next 6-12 months.
Not Biting the Tax Bullet
Changes in laws and regulations governing the NSF are necessary, said Paopoom. This approach differs from the recommendations of many economists and the World Bank, which advocate for tax reforms, such as increasing value-added tax from 7% to 10%, or raising taxes on land, property, and inheritance. However, tax hikes are unpopular and politically risky.
Thailand has been running fiscal deficits for several years, with tax revenue at just 15-16% of GDP while social welfare costs rise. The country needs to find ways to increase its tax revenue, which currently relies heavily on consumption taxes. For instance, value-added tax revenue is projected at 915.7 billion baht, compared to a mere 800 million baht from inheritance tax for fiscal year 2024. Personal income tax contributions are also low, estimated at 414.8 billion baht for the same period.
Promoting Gambling?
Although the government lottery is seen as a form of tax, there are concerns about the social impact of the new scheme, particularly the potential for encouraging gambling. Paopoom countered these fears, asserting that the scheme would transform lottery purchases into savings, aligning with Thais’ risk-taking nature.
Potential to Fail
Critics are skeptical about the scheme’s success. Anusorn Tamajai, director of the Digital Economy, Investment, and Trade Research Center at the University of the Thai Chamber of Commerce, noted that the scheme might fail due to Thailand’s high household debt, currently at 91% of GDP. Many people, especially those in the informal sector, lack sufficient income for retirement savings as they live on debt.
Anusorn urged the government to focus on economic and social welfare reforms rather than relying on populist policies. He emphasized the importance of a comprehensive social welfare system suitable for all ages and suggested expanding the base of workers insured under Social Security Fund’s Section 40.
The government should also develop a basic income system to ensure the well-being of all citizens and allow workers to participate in the social welfare development system. Access to natural resources should be equitable, and workers should have the right to organize trade unions, he added.
