Bangkok: In a significant move, the Cabinet of Thailand has approved a new method for calculating old-age pensions known as the "CARE formula" (Career Average Revalued Earnings). This reform marks the most substantial change in the pension structure since 1999, aiming to create a fair system for contemporary workers.
According to Thai News Agency, the new CARE formula addresses issues in the previous system, which used the "last 5 years' salary" to calculate pensions. This method assumed individuals would have their highest earnings before retirement, but many workers in Thailand face layoffs or transition to independent work around age 50, often with reduced salaries. Consequently, individuals with lower salary contributions in their final working years received less pension than those who contributed more only toward the end of their careers, leading to a "higher contribution, lower reward" problem. This issue has even led to lawsuits reaching the Supreme Court.
Assoc. Prof. Dr. Sastharam elaborated on the CARE formula, which will now consider the "average lifetime salary" from 1999 onwards for pension calculations. The formula adjusts past salaries to present values, ensuring workers are not disadvantaged by inflation. For example, a salary of 7,000 baht in 1999 will be adjusted to match the current salary ceiling, such as 17,500 baht.
The new formula promises several benefits. Approximately 600,000 of the current 800,000 pensioners will see an immediate increase, with no one receiving less than before. On average, pensions will increase by about 10%, improving the quality of life for retirees. Currently, only 40% of pensioners receive more than 3,000 baht, but the new formula aims to raise this figure to 60%.
The ministerial regulation is expected to be published in the Royal Gazette soon, with implementation slated for six months later, likely in 2027. A five-year transition period is planned to help those nearing retirement adjust smoothly.
Beyond monetary adjustments, the reform envisions additional social security improvements, such as recreational welfare through movie and travel vouchers to enhance mental health, and financial support during periods of unemployment for skill development.
The CARE formula represents a significant step in ensuring fairness and dignity for insured individuals, reflecting contributions accurately. Assoc. Prof. Dr. Sastharam urged insured persons to register to vote for the Social Security Board by July 20th to safeguard their rights and influence future welfare policies.