‘Philippines pension system among most sustainable in Asia’

MANILA, Philippines — The Philippines has one of the most sustainable, yet least adequate pension systems in Asia, according to a study conducted by global financial service provider Allianz.

In a report, Allianz said the relatively high retirement age in the Philippines makes the country’s pension system one of the most sustainable in the region.

“In contrast to many of its neighbors, the Philippines already raised the retirement age to 65 for both men and women. As a consequence, they have currently one of the most sustainable pension systems in the region,” Allianz said.

The higher retirement age reflects the average life expectancy of Filipinos, which is now at an average of 71.4 years. Further life expectancy of Filipino males after age 65 is 13.7 years, and for females, 18.4 years, Allianz said.

However, the Philippines still has a marked gap with regard to coverage and access to financial services, the report said.

Allianz said only about one-third or 37.3 percent of the working population is effectively covered by the public pension system. Moreover, only 31.8 percent of the population above 15 years old have access to financial services.

These, according to Allianz, present hardly opportunities to build up enough savings for old age.

On a scale of one to seven – one representing no need for reform and seven being high pressure for reform – Philippines had an Allianz Pension Indicator (API) of 3.8, with a 2.7 score in the sustainability sub-index and 4.7 in the adequacy sub-index.

On a regional perspective, Michaela Grimm, senior economist of Allianz and one of the authors of the report, said the coronavirus pandemic only temporarily interrupted the aging trend in Asia, where the population aged 65 years old and up are expected to reach 955 million by 2050.

However, Grimm said this did not mean the health crisis did not affect pension systems in the region.

“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,” Grimm 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 said.

Ludovic Subran, chief economist of Allianz, warned that failing to reform the pension system could impact economic growth, which fared well even during the coronavirus pandemic.

“By ignoring the looming demographic crisis, which will not spare Asia either, it could easily forfeit its advantage. 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 said.