THE Philippines has the fourth worst pension among 39 economies in the world, and it has to improve the adequacy and integrity of its retirement income system, according to a report.
In the Mercer CFA Institute Global Pension Index 2020, the country received a dismal 43 out of 100 to place 36th among 39 nations in terms of pension system. The Philippines only bested Turkey, Argentina and Thailand on the list.
According to the report, the Netherlands and Denmark have the best pension for their “first-class and robust retirement income system that delivers 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 also has major weaknesses and/or omissions that need to be addressed.” Countries with a D rating are the Philippines, Japan, China, India, Mexico, Turkey, Argentina and Thailand.
The average score globally was 59.7, and the Philippines was way off the mark at 43, which is lower than the 43.7 it obtained last year.
By subindex, the Philippines was given a grade of 38.9 for adequacy and 34.8 for integrity. It got its highest score of 53.4 for sustainability.
“The Philippines’s retirement income system comprises a small basic pension and an earnings-related Social Security System. Members can receive a lifetime pension if they have contributed for a minimum of 120 months,” the report explained of the country’s pension.
“If this requirement is not met, the retiree will receive a lump sum upon retirement equal to the member and employer contributions plus interest,” it added.
According to the Mercer report, the Philippines can improve its pension by increasing the minimum level of support for the poorest aged individuals.
Likewise, the country can upgrade its retirement system by enhancing the coverage of workers in occupational pension schemes that would augment contributions and assets. The Mercer report also recommended putting aside funds in the public system for the future, which should decrease reliance on the pay-as-you-go system.
Manila, meanwhile, was urged to introduce noncash-out options for pension plans proceeds so they can be preserved for retirement purposes.
This is the second time the Philippines was rated in the annual Mercer report, which surveys the financial security provision in 39 countries and compares how economies are improving their systems for their retired citizens.
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