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Retirement system in Philippines among worst worldwide
MANILA, Philippines — The Philippines has the fourth worst retirement system among 37 countries, according to a study which assesses various pension systems across the globe.
Based on the 2019 Melbourne Mercer Global Pension Index (MMGPI), the Philippines’ retirement system ranked 34th among 37 countries, with an overall index value of 43.7.
This is the Philippines’ first time to be included in the MMGPI study, which is now on its 11th year. The index studies 37 retirement systems across the world covering almost two-thirds of the global population.
“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,” said Harold Tan, wealth leader for Mercer Philippines.
According to Mercer, the study covers three sub-indices, namely sustainability, adequacy and integrity to measure each retirement system.
The company said the 2019 index calculates the net replacement rate, which refers to the level of retirement income provided to replace the previous level of employment earnings.
Based on the study, the Philippines found itself among the top 15 for sustainability sub-index, with a score of 55.5.
Sustainability includes factors, such as the economic importance of the private pension system, level of funding, the length of expected retirement, labor force participation rate of the older population, the current level of government debt and the level of real economic growth.
On the other hand, the country had the third lowest ranking in adequacy, with a 39 sub-index value.
Mercer said adequacy refers to the benefits provided to the poor and a range of income earners, as well as design features and characteristics that enhance the efficacy of the overall retirement income system.
The Philippines was also at the bottom of the integrity sub-index—which considers regulation and governance, protection and communication for members, and operating costs of the pension system—with a score of 34.7.
“Based on its results and ranking in its first inclusion in the index, the Philippines can consider increasing the minimum level of support for the poorest aged individuals and widening coverage of employees,” Tan said.
“It can also look into setting aside funds in the public system for the future and introducing options for retirement plan proceeds to be preserved for retirement purposes,” he said.
Source: https://www.philstar.com/business/2019/10/24/1962780/retirement-system-philippines-among-worst-worldwide#3PIBBG4m9y8XuK3e.99