ADB raises pension alarm

MANILA, Philippines—The Philippines and its neighbors need to implement vital pension reforms—including hike in members’ contributions and increase in the retirement age—to ensure sustainability of their respective pension systems, the Asian Development Bank said.

ADB cited the growing number of Asians on the cusp of retirement.

Also, it mentioned the growing proportion of benefits paid by social security institutions to the contributions they collected. The bank said this could lead to the depletion of funds over the long term if the problem were not immediately addressed.

It said the number of Asians aged at least 60 currently stood at 410 million. This may grow significantly and will likely triple by 2050.

“Asian countries do not yet have well-established pension systems capable of providing economic security for their growing elderly populations,…” ADB said in one of its publications, “Pension Systems in East and Southeast Asia,” edited by its principal economist Donghyun Park and economic officer Gemma Estrada.

In the case of the Philippines, Ernesto Reyes, one of the authors of the book, said that one of the key problems is non-compliance in terms of contributions made by most of fund members. According to Reyes, the compliance rate for the Philippines’ Social Security System stands at only 31 percent.

“With the already high benefit-to-contribution ratio of the SSS, greater increases in contribution rates would be required to sustain the pension program if no improvement is made on the current compliance rate of 31 percent,” ADB said.

Reyes estimated that the life of the SSS fund would last only until 2036.

“The pension system should be self-sustainable,” he said.

Apart from increasing members’ contributions, raising the retirement age is another measure that may help lengthen the life of the SSS fund, he said.

In the Philippines, the optional retirement age is 60 years old and the mandatory retirement age is 65 years old.