Ageing Thais put pressure on creaking pension system

Retirement savings remain inadequate

Thailand's social security system is becoming increasingly inadequate to support its rapidly ageing population, with people over 60 projected to account for a third of the population over the next 25 years, according to Kiatnakin Phatra Financial Group (KKP).

The bank's study found that people over 60 currently account for 24% of Thailand's total population. The country is moving towards becoming a fully aged society, while its income per capita remains relatively low.

Moreover, Thailand is ageing faster than its regional peers despite having a comparatively low income level.

Amid limitations in government welfare provisions, Thais need to pay greater attention to retirement planning. More than 54% of Thai workers remain outside the social security system, while the old-age allowance covers only around 7% of their living expenses. Meanwhile, the pension system and Social Security Fund reserves are facing mounting pressure from demographic changes.

"These factors show that relying solely on government welfare is insufficient to maintain a reasonable quality of life after retirement. Government social welfare benefits could also decline over the next 20 years as the financial burden continues to increase," said Pipat Luengnaruemitchai, chief economist at KKP.

According to the bank's study, as many as 86% of Thais have yet to establish a savings plan or have been unable to follow through with one. In addition, more than 80% of their savings are concentrated in bank deposits and other low-risk assets, which typically generate returns insufficient to keep pace with inflation. As a result, nearly 70% of elderly people still rely on financial support from their children or have to continue working to earn a living.

Furthermore, Thais are expected to live longer. Around 47% of people who reach the age of 60 are projected to live until at least 85. Meanwhile, Thailand's medical cost inflation is forecast to rise to 14.8% in 2026, significantly outpacing headline inflation.

Mr Pipat said the pressure is being compounded by rising healthcare costs, as health insurance policies increasingly adopt co-payment arrangements that require policyholders to shoulder a greater share of medical expenses. Consequently, investment strategies capable of generating returns above inflation while providing sufficient cash flow to support retirement living have become increasingly essential.

As part of efforts to help cope with these challenges, KKP on Monday introduced a two-stage retirement investment strategy designed to help investors accumulate wealth before retirement and generate regular income after leaving the workforce.

According to Narit Kosalathip, KKP's head of personal investment advisory, the first stage features four KKP Ready Retire funds targeting retirement in 2035 and 2045, including retirement mutual fund (RMF) options. The funds automatically adjust their investment risk levels as investors approach retirement before transitioning into retirement income funds.

The second stage comprises KKP Lifelong Income and KKP Advanced Income, which combine high-quality dividend-paying stocks with fixed-income assets to help investors combat inflation. An automatic redemption mechanism enables retirees to receive regular cash flows, supporting either long-term wealth preservation for inheritance purposes or planned withdrawals to finance their retirement lifestyles.