The Philippines needs to reform its pension system to adapt to the impact brought by the pandemic and other economic challenges as the country remains among the worst places for retirees.
The latest Mercer’s Global Pension Index showed the Philippines is still the second worst among 44 economies in terms of retirement income system.
The country’s score of 42 out of 100 is a deterioration from last year’s 42.7. It also fell below the regional and global averages of 53.8 and 63, respectively.
The latest index showed the continued shortcomings of the pension system in the country and the need to provide more adequate and sustainable retirement benefits.
Mercer said there is a need to increase the minimum level of support for the poorest aged individuals, as well as improve coverage of employees in occupational pension schemes, thereby increasing the level of contributions and assets.
The government is also urged to set aside funds in the public system for the future to reduce reliance on the pay-as-you-go system.
Likewise, it can also introduce non-cash-out options for retirement plan proceeds to be preserved for retirement purposes and improve the governance requirements for the private pension system.
Mercer Asia wealth business leader Janet Li said the economic impact of the pandemic, as well as a volatile geopolitical landscape, led to the readjustment of priorities for all economies.
“Governments cannot afford to put refining and improving their retirement systems on the back burner, but must prioritize and take action promptly,” Li said.
Mercer Asia Pacific managing director Nick Pollard noted that near-term economic challenges such as high commodity prices, rising interest rates, currency depreciation and capital outflows are hitting many countries, especially developing ones including the Philippines.
Pollard warned that in the long term, economies face the risk that such trends would persist and become part of the new normal.
“As such, there is no market in Asia that does not need urgent pension reforms, and policymakers and industry stakeholders need to take collective action to ensure the adequacy of pension balance sheets and the sustainability of retirement benefits,” he said.
Based on the index, the Philippines only improved in the adequacy sub-index where it scored 40.5 from last year’s 38.9. This sub-index considers the benefits provided to the poor and a range of income earners.
However, the country slipped in the integrity sub-index after scoring 30 from 35 in 2021. Integrity considers the areas of regulation and governance, protection and communication for members, and operating costs of the pension system.
Its sustainability score, which looks into the labor force participation rate of the older population and the level of real economic growth, also declined to 52.3 from 52.5.
Globally, Iceland’s retirement income system scored 84.7 and topped the list for the second year. It was followed by the Netherlands and Denmark.
In Asia, Singapore remained the top spot for retirees, and include Hong Kong and Malaysia as well.
Source: Philstar