THE PHILIPPINES has among the most sustainable pension systems in Asia, but it needs to address issues involving access and coverage, according to Allianz SE, citing the findings of a report it prepared.
The country scored 3.8 in the Allianz Pension Indicator which is based on three pillars: demographic and fiscal prerequisites; sustainability; and adequacy. A reading of 1 means no need for reform while a score of 7 means urgently needed reforms.
“The Philippines already raised the retirement age to 65 for both men and women; as a consequence, they have currently one of the most sustainable pension systems in the region,” Allianz said.
However, some gaps still need to be addressed as only a third of the working population is effectively covered by the public pension system.
With many Filipinos still holding no formal financial accounts, building up sufficient savings for old age also becomes difficult, it added.
In 2014, only 20% of the 7.6 million Filipinos aged 60 years and above are covered by state-back mandatory pensions such as the Social Security System (SSS) and the Government Service Insurance System, according to the Philippine Statistics Authority showed. Only 29% of adult Filipinos had formal bank accounts as of 2019, according to central bank data.
Among 15 Asian pension systems gauged by the study, the Philippines was seventh. It was ahead of India (4), Thailand (4.1), and Vietnam (4.4), among others. China (3.1) topped the rankings while Cambodia (5.7) at the bottom.
“The main cause of concern with respect to the long-term sustainability of pension systems is the retirement age in many markets which does not reflect the gains in life expectancy over the last decades,” the study found.
It said that while some economies are already looking into increasing the retirement age, reforms may not be sufficient to mitigate the expected increases in life expectancy.
Asia’s population of people aged 65 years and older is expected to hit 955 million in 2050 from the current 412 million.
Allianz Senior Economist Michaela Grimm said coronavirus disease 2019 could worsen inequality due to rising unemployment and interrupted education.
She said short-term fixes such as temporary reduction or suspension of pension contributions or the temporary withdrawals from pension fund savings could increase old-age poverty in the years to come.
“If anything, COVID-19 has made thorough pension reforms even more urgent,” Ms. Grimm said.
In the Philippines, SSS officials have opposed suspending the scheduled increase of contributions, saying it will jeopardize the pension system’s ability to disburse benefits. — Luz Wendy T. Noble