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The Philippines has the fourth worst pension among 39 economies in the world, and must improve the adequacy and integrity of its retirement income system, according to a report.
On the 2020 Mercer CFA Institute Global Pensions Index, the country received a lousy 43 out of 100 to rank 36 out of 39 nations in terms of pension systems. The Philippines only surpassed Turkey, Argentina and Thailand on the list.
According to the report, the Netherlands and Denmark have the best pension for their “robust and first-class retirement income system that offers good benefits, is sustainable and has a high level of integrity.”
As for those with a D rating, their system “has some desirable features, but it also has significant weaknesses and / or omissions that need to be addressed.” The D-rated countries are the Philippines, Japan, China, India, Mexico, Turkey, Argentina, and Thailand.
The global average score was 59.7, and the Philippines fell far short of the mark at 43, which is lower than the 43.7 it scored last year.
By sub-index, the Philippines received a rating of 38.9 for adequacy and 34.8 for completeness. It obtained its highest score of 53.4 in sustainability.
“The Philippine retirement income system comprises a small basic pension and an income-related social security system. Members can receive a life pension if they have contributed for a minimum of 120 months ”, explains the report on the country’s pension.
“If this requirement is not met, the retiree will receive a lump sum upon retirement equal to the member’s and employer contributions plus interest,” he added.
According to the Mercer report, the Philippines can improve its pension by increasing the minimum level of support for the poorest older people.
Likewise, the country can improve its retirement system by improving the coverage of workers in occupational pension plans that would increase contributions and assets. The Mercer report also recommended reserving funds in the public system for the future, which should decrease reliance on the pay-as-you-go system.
Meanwhile, Manila was urged to introduce non-cash options for pension plan income so that they can be kept for retirement purposes.
This is the second time the Philippines has been rated in the annual Mercer report, which looks at the provision of financial security in 39 countries and compares how economies are improving their systems for their retired citizens.
