The Philippine pension system: promoting fairness and sustainability / Gemma Estrada

Estrada, Gemma (2012) The Philippine pension system: promoting fairness and sustainability / Gemma Estrada. In: International Conference On Population Ageing: Issues and Challenges, 11 July 2012, Faculty of Economics and Administration, University of Malaya, Kuala Lumpur. (Unpublished)

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Abstract

The rapidly changing demographics and weakening of traditional old-age family support have heightened the need to take stock of the Philippine pension system, currently characterized by a four-pillar structure. The first pillar refers to social assistance programs created to address the needs of the elderly poor. The second pillar covers the following mandatory defined-benefit programs: (i) the Social Security System (SSS) for private sector workers, (ii) the Government Service Insurance System (GSIS) for public sector workers, and (iii) the Armed Forces of the Philippines Retirement Service Benefit System for the military, which altogether cover about 79% of the labor force. The third pillar encompasses mandatory defined contribution programs, which can be further expanded. The fourth and final pillar covers voluntary pension programs, involving various forms of savings instrument. Because the pension system is fragmented, contributions and benefits vary depending on the program. There is a large discrepancy between the contribution rate of the GSIS (21%) and SSS (10.4%) programs. The GSIS program generally offers better benefits than the SSS as reflected in the gap between their replacement rates, but in both the rates are much higher than the best practice targets of 40% to 50%, and this may threaten the pension system’s long-term sustainability. To make the system more sustainable, a shift to a totally mandatory defined-contribution system may be required, but this needs appropriate level of infrastructure and maturity of the financial market. Since a drastic transition to a defined-contribution system may be difficult, another option is reforming the current defined-benefit system through harmonizing the mandatory programs, revising the benefit structure, raising the retirement age, and improving governance. Still, a third option is to move toward a structure that combines the two systems, i.e., with a reduced mandatory defined-benefit component that meets basic pension needs and an enlarged mandatory defined-contribution program to supplement the defined-benefit system.

Item Type: Conference or Workshop Item (Paper)
Additional Information: Author from Asian Development Bank
Keywords: Philippine pension system, mandatory defined benefit system
Subjects: 300 Social sciences > 305 Social groups
Division/Agency/State: LPPKN - National Population and Family Development Board, Malaysia > Division of Population
Deposited By: Mrs Nor Azaian Abdullah
Deposited On: 15 Jan 2013 08:39
Last Modified: 15 Jan 2013 08:39
URI: http://familyrepository.lppkn.gov.my/id/eprint/275

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