A recent study revealed that the retirement or pension system of the Philippines is the 4th lowest out of 36 countries.
According to the 2019 Melbourne Mercer Global Pension Index — which takes into consideration the pension system’s sustainability, adequacy, and integrity — the Philippines had an overall index value of 43.7, placing it above Turkey, Argentina, and Thailand.
The index also considers the level of retirement income provided to replace the previous level of employment earnings.
“By benchmarking global retirement income systems, the Melbourne Mercer Global Pension Index can help both the public and private sectors in the Philippines understand how they can improve the country’s retirement system and generate better outcomes for retirees,” Harold Tan, wealth leader of Mercer Philippines, said.
To improve the country’s index performance, the study recommended increasing the coverage of employees and support for the poorest aged individuals, setting aside public funds for the future, and introducing non-cash out options for retirement plan proceeds.
The Philippine pension system is at the very bottom of the list in terms of integrity, an area that considered regulation and governance, protection and communication for members, as well as operating cost.
In adequacy, an area that considered the benefits provided to the poor, as well as design features that enhance the efficacy of the overall pension system, the Philippines ranked the third lowest.
However, the country placed in the top 15 for the most sustainable in terms of level of funding, length of expected retirement, labor force participation rate of the older population, and the current level of government debt and economic growth.
The Netherlands ranked first with an overall index value of 81. This is followed by Denmark with an index value of 80, and Australia with 75. Other countries in the top 10 were Finland, Sweden, Norway, Singapore, New Zealand, Canada, and Chile.
“Systems around the world are facing unprecedented life expectancy and rising pressure on public resources to support the health and welfare of older citizens. It’s imperative that policy makers reflect on the strengths and weaknesses of their systems to ensure stronger long-term outcomes for the retirees of the future,” said David Knox, author of the study.