Bleak retirement scenario

Retirement is a phase in a person’s life that is looked at with optimism or dread depending on the financial circumstances involved.

For those who had the foresight to plan for it, the end of employment is an opportunity to enjoy the company of family and loved ones. For those who failed to do so for one reason or another, retirement could be a nightmare.

In an online investment briefing, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said an estimated 80 percent of Filipinos close to retirement age were unprepared for the financial costs of living after their retirement from work.

According to Diokno, “eight out of 10 Filipinos aged 60 and above, and in many cases retirees, do not receive sufficient pension to fully cover their living expenses.”

For Filipinos employed in the government or private sector, the source of their pension is either the Government Service Insurance System (GSIS) or the Social Security System (SSS), respectively.

By and large, due to higher premium contributions, GSIS pensioners receive higher pensions compared to their SSS counterparts.

What’s more, the pension of some GSIS pensioners, e.g., military and judiciary retirees, is indexed to the salary being received by those presently employed in their former positions.

Thus, any increase in the latter’s salary automatically applies to the GSIS pensioners concerned.

On the other hand, SSS pensioners have to depend on the availability of funds and the generosity of the SSS officials for any upward adjustment in their pension.

No doubt, every Filipino aspires for a financially comfortable retirement. Although Filipino tradition morally obliges the children or younger family members to support their elderly parents, pensions are essential in enhancing the reti­rees’ self-esteem.

Having money at hand to spend for personal needs or indulge in some “guilty pleasures” and not depend on money from relatives makes retirement pleasurable.

Unless the individual belongs to the privileged GSIS retirees earlier mentioned or receives a substantial SSS pension, this retirement benefit cannot be relied upon solely for financial sustenance during the retirement years.

True, there are investment schemes, e.g., mutual funds, bonds and unit investment trust funds, that can provide additional income to retirees. But these investments are possible only if the future retiree has sufficient disposable income for that purpose.

How can average employees or workers, i.e., those receiving minimum wage or a little above, think of making any of those investments when their take-home pay is just enough to sustain the daily expenses of their families?

It would be farthest from the mind of people who live from paycheck to paycheck or have to borrow from “5-6” lenders to set aside money from their meager pay to invest in investment programs.

The needs of the family’s daily living now, not the reti­ree’s financial well-being many years down the road, is the priority of the great majority of Filipinos in today’s workforce.

In an effort to encourage Filipinos to build funds for retirement, Congress enacted a law creating the Personal Equity and Retirement Account (Pera) where deposits by investors are collated and invested in equities or bonds.

To sweeten the pot, the investment account enjoys certain tax privileges subject to compliance with certain requirements.

Diokno said that, as of July this year, the number of Pera investors reached only 1,586 with contributions amounting to P137 million in spite of the fact that the Pera can be crea­ted digitally.

A possible reason for the lack of interest in Pera is its availability only in the banks’ head office and not in their branches.

For prospective Pera investors who live far from the main office and want to have a personal interaction with a bank employee before he or she parts with his or her hard-earned money, that limitation is a big deterrent to investment.

While it is true the Pera can be opened digitally, there is a lot of hesitation in going through that process because of lack of trust or familiarity with that system. Confidence in online banking in the Philippines still has a long, long way to go.

Considering the financial factors involved, the retirement scenario in the Philippines leaves much to be desired.

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