The International Labour Organisation has warned that Thailand's social security system is likely to collapse in the next 45 years if the country does not adopt a national pension fund to boost savings, a Finance Ministry source said.

The ILO was hired by the Labour Ministry to study the labour situation, and it found that by 2051 Thailand's social security system would be bankrupted by insufficient savings.

The government has been aware for some time that the level of savings derived from the current social security system is too low and plans to introduce a national pension fund, which includes mandatory contributions by both employers and employees. Apart from low savings, the current system has a lack of procedures to ensure continual investment.

A recent study by the Asian Development Bank also showed a similar result, but the predicted point of bankruptcy in that study was 56 years ahead.

The ADB proposed in its study to the Finance Ministry that mandatory contributions to the Social Security Fund should be made as soon as 2018. The private sector is now allowed to set up provident funds and employees contribute to the funds on a voluntary basis.

Naris Chaiyasoot, director-general of the Fiscal Policy Office, said yesterday that ADB's initial study had suggested that employers and employees should each contribute 3 per cent of monthly salaries. This should become compulsory in businesses with more than 100 employees by 2008, and all businesses by 2018.

The bank predicted that with the implementation of the national pension fund, Thai workers would receive higher incomes after retirement.

"I would like to emphasise that this is only an initial study that experts from the ADB did. Whether we implement it depends on policymakers, but I really believe we need to have a national pension fund," Naris said.

The ADB also encouraged the country to set up a national pension fund and said the country should separate the Social Security Fund's short-term benefits from long-term benefits. Any increase in the contribution proportion should timed carefully.

The establishment of the national pension fund would help boost overall savings by Bt80 billion per year.

Once the current 13 million workers with 35 years of work contribute to the national pension fund with a minimum requirement of 6 per cent - 3 per cent by employee and 3 per cent by employer - they could expect to get a pension of no less than 50 per cent of their final regular salary, although it is still not certain if this would be in monthly instalments or a lump sum.