Bangkok: The Cabinet has given the green light to the "CARE formula," a new framework aimed at reforming old-age pensions based on lifetime earnings during employment. Mr. Chulaphan Amornvivat, the Minister of Labour, stated that this initiative seeks to establish fairness and inclusivity for an estimated 600,000 to 800,000 insured individuals.
According to Thai News Agency, Mr. Chulaphan disclosed after the Cabinet meeting that the Ministry of Labour put forth two key proposals. The first involves extending work permits for nationals from Laos, Myanmar, and Vietnam. Initially set to expire on November 11, 2025, the work permits will now be valid until December 1, 2027. This extension aims to complete the registration process and prevent these individuals from becoming informal workers. Additionally, the Prime Minister has directed the Ministry of Labour to speed up the registration process for other pending workers in the country.
The second proposal involves a draft ministerial regulation concerning the payment of old-age benefits. The "CARE formula" shifts the pension calculation from using an average of the last five years of earnings to an average of monthly contributions throughout an individual's working life. This draft has been approved by the Cabinet and will be forwarded to the Office of the Council of State for detailed review. The subsequent steps are expected to take approximately 8-10 months, which includes developing a system to implement the new calculation method without needing further Cabinet approval.
Mr. Chulaphan highlighted that the new calculation method ensures equitable treatment for all contributors to the Social Security Office. Unlike the previous system, which could lead to discrepancies, the "CARE formula" will calculate pensions based on total contributions, supporting those who have varied employment histories. The Ministry plans to compensate those already retired and receiving pensions by applying both old and new calculation methods to provide the better outcome. For future retirees within the next five years, a 100% reimbursement of any difference will be provided.
The initiative is aimed at enhancing fairness and sustainability within the Social Security Fund, benefitting hundreds of thousands of individuals by aligning pension benefits with actual contributions. Mr. Chulaphan asserts that this reform will significantly contribute to the financial stability of the fund while addressing inequities in the current system.