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This presentation was made by Charles Knox-Vydmanov, Social Protection Policy Adviser at HelpAge International on 5th March 2013. It compares the Thai social pension to similar schemes globally and introduces future considerations for the Old Age Allowance in Thailand.
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Social pensions in Thailand and beyond
Charles Knox-Vydmanov, HelpAge International
5 March 2013
Growing interest in social pensions• Pension coverage globally remains low
• Estimated just 20% of older people get a social pension
• Purely contributory models of social protection have failed to expand coverage
• “Social” pensions increasingly seen as key part of the solution• Defined as:
• Eligibility:• Always: citizenship and/or residency
• Sometimes:• Means test
• Pensions test
• Geographical restriction
State provided non-contributory regular cash transfer to older people
Countries with social pensions
www.pension-watch.net
Social pensions “wave” in last twenty years
1993: Old age allowance introduced2009: Extended to nearly all older people
Thailand has been part of this trendSocial pension coverage since 1995
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10 -
1,000
2,000
3,000
4,000
5,000
6,000
No.
of
recip
ien
ts (
‘00
0s)
Source: Thaworn Sakunphanit and Worawet Suwanrada (2010) 500 Baht Universal Pension Scheme in ILO/UNDP, Successful Social Protection Floor Experiences
A leader in the regionM
on
golia
Ph
ilip
pin
es
Mala
ysi
a
Vie
tnam
Ind
ia
Ban
gla
desh
Nep
al
Th
ailan
d
Bru
nei
Tim
or-
Lest
e0%
50%
100%
150%
200%
250%
Covera
ge in
dex
Coverage index equals absolute number of beneficiaries as a percent of the total population 65+. Note that in some cases where eligibility age is below 65 – including Thailand – some beneficiaries will be below the age of 65. Source: Social pensions database (22 February 2013 – unpublished); UN Population Division, World Population Prospects, 2008
Beneficiaries of social pensions relative to population over 65:
A leader in the region
Ph
ilip
pin
es
Ind
ia
Vie
t N
am
Mala
ysi
a
Ban
gla
desh
Kore
a,
Rep
u..
.
Nep
al
Th
ailan
d
Bru
nei D
ar.
..
Tim
or-
Lest
e
Kir
ibati
Sam
oa0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
Cost
(%
of
GD
P)
Source: HelpAge International, Social pensions database – www.pension-watch.net
Spending on social pension
Relationship to health and care• Pensions help older people and their families to cover health costs
• Thailand: pension used in cases where older people cannot access public health facilities (Suwanrada and Wesumperuma, 2012)
• Mexico: increase in visits to the doctor by 22 per cent (Aguila et al, 2011)
• Not just about healthcare costs, but also cost of access (eg. transport)
• How do social pensions interact with care?• The caring role throughout the life course
• women who spend a long time caring for children and families unable to accumulate a pension – social pensions particularly important
• social pensions support older people in caring role for other family members (especially grandchildren)
• Do social pensions support care of older people?• Clear logic – support to families caring for an older person
• Strengthening family relationships – little evidence of negative “crowding out”
• But limited research into the issue
Future considerations in Thailand
1.Coverage: is the social pension a good model for the future?
2.Adequacy: Is 600 Baht enough?
3.Sustainability: Can a more generous social pension be sustained?
Future considerations in Thailand
1.Coverage: is the social pension a good model for the future?
2.Adequacy: Is 600 Baht enough?
3.Sustainability: Can a more generous social pension be sustained?
Current Thai pension system
RicherPoorer
Pen
sion
in
com
e
Older people
Contributorypensions(mainly government)
Old Age Allowance
Future vision:Increase contributory savings
RicherPoorer
Pen
sion
in
com
e
Older people
Contributory pensions:Future vision- Government pensions- Informal sector
Old Age Allowance
Option 1:Means-tested pension
RicherPoorer
Pen
sion
in
com
e
Older people
Old Age Allowance
Contributory pensions:Future vision- Government pensions- Informal sector
Challenges
• Issues of means testing
• Inaccuracy
• Administrative, political, social costs
• Can create perverse incentives
Option 2:Citizen’s pension
RicherPoorer
Pen
sion
in
com
e
Older people
Old Age Allowance
Contributory pensions:Future vision- Government pensions- Informal sector
“Administratively, this is the simplest structure, with the lowest transaction costs, for the public pillar — an important advantage in developing countries with limited institutional capacities and incomplete record-keeping systems. It avoids the disincentive to work and save inherent in means-tested plans. Its universal coverage helps ensure that the poverty reduction objectives are met, [and] provides a basic income for all old people.”
World Bank, 1994
Countries with this model include…
New Zealand, Bolivia, Namibia, Mauritius
Option 3:Citizen’s pension (with tapered pension test)
RicherPoorer
Pen
sion
in
com
e
Older people
Old Age Allowance
Contributory pensions:Future vision- Government pensions- Informal sector
Countries with this model include…
Chile, Norway, Sweden, Maldives
Future considerations in Thailand
1.Coverage: is the social pension a good model for the future?
2.Adequacy: Is 600 Baht enough?
3.Sustainability: Can a more generous social pension be sustained?
Adequacy is low by international standards
Current levels60 - 69: 600 Baht 70 - 79: 700 Baht80 - 89: 800 Baht90+: 1,000 Baht
Mexic
o
Nep
al
Th
ailan
d
Bru
nei D
a..
.
Bots
wan
a
Gu
yan
a
Sw
azi
lan
d
Tim
or-
Lest
e
Kir
ibati
Nam
ibia
Bolivia
Sam
oa
Th
ailan
d
Mau
riti
us
Leso
tho
Koso
vo
New
Zea..
.
OEC
D a
ver.
..
0
1
2
3
4
5
6
7
Cost
(% o
f G
DP
)
Old Age Allowance @ 1,500 Baht per month
How would a more generous option compare
Source: HelpAge, Social Pensions Database, www.pension-watch.net
Current old age allowance
How much would a more generous pension cost?
Conclusions• Thailand has put growing emphasis on social pensions
• Following a global trend
• Social pensions interact with issues of health and care
• What next for the Old Age Allowance?• “Citizen’s pension” a good model…
• …but could be tweaked to better fit with contributory system
• Current benefits are low• They could be increased without making old age allowance
unaffordable
Additional slides
Pensions and informality
Work
ing
-ag
e p
op
ula
tion
con
trib
uti
ng
to o
ld
ag
e p
en
sio
n s
ch
em
e (
%)
Wage and salaried employment (as % of total employment) Source: ILO 2011
Why target?• Efficiency
• Why give benefits to the “non-poor” = wasteful
• “A given resource envelope will have five times more impact on poverty if it is disbursed to the poorest 20% than if it is thinly spread over an entire population.”
Stephen Devereux, 2009
• But:• Efficiency gains are minimal
• Other costs:• Social
• Economic
• Administrative
• Political
3. Social pensions: design and implementation
10% coverage 30% coverage0
10
20
30
40
50
60
70
80
90
100
61
35
71
43
62
37
67
42
57
39
58
41
Bangladesh
Indonesia
Nepal
Pakistan
Rwanda
Sri Lanka
Target group
% o
f ta
rget
gro
up
exclu
ded
Efficiency?
Source: AusAid (2011), Targeting the Poorest: An assessment of the proxy means test methodology
Exclusion errors of proxy means testing
3. Social pensions: design and implementation
Inaccuracy in targeting
Bangladesh Chile0
10
20
30
40
50
60
70
80
90
100in bottom quintile
in higher quintiles
% o
f re
cip
ien
ts
Source: Barrientos, 2009; ILO, 2006
Reasons
•How to measure “poor”?• Assets?• Income?
•Challenges in obtaining information
• Poor face greater barriers to accessing benefits• Lower literacy• Access to documentation
International picture
•Good targeting can expect to miss ½ of target group
3. Social pensions: design and implementation
The costs of targeting (1)• Social costs
• Can create divisions in communities and loss of social cohesion
• Namalomba in Malawi cash transfer: “I was lucky that I was identified to benefit from the scheme. All my neighbours are poor and they need similar help. They despise me now and I can’t do anything about it’’
• Rewarding dishonesty
• Economic costs• Perverse incentives – you lose the benefit if you:
• Work
• Invest
• Have assets
• Discourages saving in the contributory system.
3. Social pensions: design and implementation
The costs of targeting (2)• Administrative costs
• Targeting is costly and complicated to administer
• “The complexity of means testing compared to, say, universal provision, is associated with higher administrative costs and increased fraud and error.” National Audit Office UK 2011
• Comparison in Zambia• Universal approach – 6% administrative costs
• Targeted approach – 15-20% administrative costs (maybe more)
• Political costs• Corruption is easier with targeted schemes – less transparent
• Can affect the popularity of the scheme.
• Universal transfers are more popular• Bigger budget – may make sense to give to wealthier people to get buy in.
3. Social pensions: design and implementation
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