The Effects of Compulsory Pension Wealth on the Personal Saving Behavior

Abstract

Thailand has many compulsory saving schemes for longevity and income uncertainty at old age. A crucial question is whether how saving schemes affect saving behavior. The empirical results of this study found that the present value of the Social Security Fund benefit cannot encourage private employees to save more, although the benefit is insufficient to live after retirement. This is because less additional welfares provided insufficiently.  While the present value of the government pension fund encourages government officials to save more. A reason is due to this compulsory pension provides the opportunity to government officials to save up to 15 percent of their salary, and the return of saving is quite high. Moreover, they have also other welfare benefits that can reduce the cost of living, thus allowing them to save more ultimately. Finally, the present value of the old-age allowance can encourage workers to save more. A possible reason to explain this is that the old age allowance is too low which may insufficient when becomes elderly. As a result, additional voluntary saving is needed in order to increase retirement saving among workers. Therefore, the government should extend the compulsory pension covers to all Thais and create a savings guarantee for the savers to have enough savings to sustain life in old age. Moreover, increase the welfare of private employees equal to government officials in order to reduce daily expenses and have more money to save.