While the Philippines’ pension system is one of the most sustainable in Asia, it is also one of the least adequate, a report released by Allianz showed.
Allianz yesterday unveiled its first Regional Pension Report, taking the pulse of Asia’s pension systems guided by the Allianz Pension Indicator (API).
The indicator is based on three pillars: demographic and fiscal prerequisites, sustainability, and adequacy, taking all in all 30 parameters into account.
The API assigns each market points ranging between 1 and 7, with 1 meaning there’s no need for reform, while 7 means that there is high reform pressure.
The Philippines API 2021 score is 3.8, which places it around the middle of the 15 Asian markets covered in the report.
In terms of starting points or basic conditions, the country has a score of 4.1, for sustainability, 2.7, and for adequacy, 4.7.
In contrast to many of its neighbors, Allianz pointed out the Philippines raised the retirement age to 65 for both men and women.
“Due to the relatively high retirement age, the Philippines has one of the most sustainable pension systems in the region,” Allianz said
It, however , pointed out other challenges remain.
“There is still a marked gap with regards to coverage – only a good one third of the working population is effectively within the public pension system – and access to financial services: according to latest available figures less than half of the population has an account at a financial institution and thus hardly the possibility to build up enough savings for old-age,” Allianz said.
“Overall, Asia’s performance over the last 12 months is simply amazing. It gained a headstart over other regions. But by ignoring the looming demographic crisis which will not spare Asia either it could easily forfeit its advantage,” Ludovic Subran, chief economist of Allianz, said in a statement.
“Next generations of Asians would have to pay a heavy price for such negligence. Not addressing pension reform, key for social justice and resilience, could even spell the premature end of the Asian century,” Subran added.
Allianz said that the coronavirus pandemic 2019 (COVID-19) slows the aging trend only temporarily.
Within the next 30 years, the company said Asia’s population aged 65 years and older is expected to more than double from around 412 million today to 955 million in 2050; the share of this age group in total population is set to reach 18 percent by then.
“COVID-19 will have no lasting effect on aging. But that does not mean it has no effect at all for pensions. Quite the contrary. COVID-19 has exacerbated existing inequalities. Scars will remain not only from the deep recession, rising unemployment and interrupted education but also from some of the well-meant counter-measures such as the temporary reduction or suspension of pension contributions or the temporary allowance to withdraw pension fund savings,” Michaela Grimm, senior economist of Allianz and author of the report, said.
“These short-term fixes are likely to increase old-age poverty in the years to come. If anything, COVID-19 has made thorough pension reforms even more urgent,” she added.