PH pension system ranks poor

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    The Philippines’ retirement income system has been ranked fourth lowest in the world by a global pension index in a study that compares 37 retirement systems around the world.

    The 2019 Melbourne Mercer Global Pension Index (MMGPI) shows the Philippines registered an overall index value of 43.7.

    This is the Philippines’ first time to be included in the MMGPI study, now on its 11th year.

    “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,” said Harold Tan, wealth leader of Mercer Philippines.

    “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,” Tan said in a statement.

    The index uses the weighted average of the sub-indices of sustainability, adequacy, and integrity to measure each retirement system against more than 40 indicators.

    The 2019 index calculates the net replacement rate, that is, the level of retirement income provided to replace the previous level of employment earnings, using a range of income levels based on the Organization for Economic Cooperation and Development data to represent a broader group of retirees.

    “By benchmarking global retirement income systems, MMGPI 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,” Tan said.

    The report said the Philippines finds itself among the top 15 for sustainability, with a sub-index 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.

    However, the country had the third lowest ranking in adequacy with its 39 sub-index value. Adequacy considers 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.

    Integrity, which considers three broad areas of the pension system, namely regulation and governance; protection and communication for members; and operating costs, finds the Philippines at the very bottom with a sub-index value of 34.7.

    The Netherlands had the highest index value (81.0), and has consistently held first or second position for 10 out of the past 11 MMGPI reports. Thailand had the lowest index value (39.4).

    For each sub-index, the highest scores were Ireland for adequacy (81.5), Denmark for sustainability (82.0) and Finland for integrity (92.3).

    The lowest scores were Thailand for adequacy (35.8), Italy for sustainability (19.0) and Philippines for integrity (34.7)