PH pension system fourth worst in the world – study

Metro Manila (CNN Philippines, October 21) — The Philippines has one of the worst pension systems for retirees compared to the rest of the world, an Australia-backed study said.

The Melbourne Mercer Global Pension Index (MMGPI) 2019 rated the country's retirement income protocol at 43.7 out of 100. This placed the Philippines at the fourth-lowest rank, or 34th out of 37 countries. The study was a collaboration of the Victorian government of Australia's Monash Center for Financial Studies and professional services firm Mercer.

The local system was rated "D," defined as one that has some desirable features but come with "major weaknesses" that need to be addressed.

The study assessed a country's retirement benefits program on the grounds of adequacy, or if the pension payments are enough; sustainability, or the long-term fund life; and integrity, or its governance and regulation.

This was the first time the index covered the Philippines. MMGPI's evaluation is based on the operations of the Social Security System, which manages the retirement and other benefits of private sector workers and the self-employed.

The Government Service Insurance System handles the benefits and pensions of state employees.

READ: SSS members start paying higher contributions by April

The country scored "D" on adequacy, which is given the biggest weight at 40 percent. The study tracked whether there are enough incentives to attract more workers to contribute to pension funds and save for their retirement, if there's a minimum age to receive the benefits, protocols in place for cases of resignation or separation of married couples with regard to their benefits, and the investment strategies used to grow the fund.

The Philippines managed a passing "C" mark on sustainability with a 55.5 index rating, but flunked in integrity at just 34.7.

MMGPI put forward a number of recommendations to improve the pension system, including raising the minimum level of support for the poorest aged residents, and broadening the coverage of workers in occupational pension schemes so that they can collect more contributions and add to its assets.

The study also suggested setting aside money for the future rather than relying on a "pay-as-you-go" scheme, and offering non-cashout options so that retirement funds can be preserved until a person reaches 60 years old.

READ: SSS open to talks with OFWs on mandatory coverage

The SSS currently requires a member to contribute a portion of salaries equivalent to 120 months to qualify for monthly pension payouts once retired. If not, they will only get a lump sum of the contributions made by the worker and the employer, plus interest.

For other countries, MMGPI said pension fund administrators should encourage or require higher levels of saving by raising salary contributions of workers, promote more working people among older citizens. and plug leakages from the system.

Globally, only two retirement systems were rated "A": the Netherlands, with a score of 81 and Denmark at 80.3.

Trailing the Philippines are the retirement systems in Turkey, Argentina, and Thailand, the study said.