GLOBAL PENSION INDEX FINDS PH’S RETIREMENT INCOME SYSTEM RANKS FOURTH LOWEST IN THE WORLD

21 OCTOBER 2019

PHILIPPINES, MANILA


  • Melbourne Mercer Global Pension Index compares 37 retirement systems around the world, including the Philippines
  • The Index measures each country’s retirement system through three sub-indices: sustainability, adequacy and integrity
  • Increasing coverage of employees and support for the poorest aged individuals, setting aside public funds for the future, and introducing non-cash out options for retirement plan proceeds can improve the Philippines’ Index performance

The Philippines' retirement system has been ranked fourth lowest in the world by the 2019 Melbourne Mercer Global Pension Index (MMGPI), a study of 37 retirement systems across the world covering almost two-thirds of the world’s population. 


With an overall Index value of 43.7, this is the Philippines’ first time to be included in the MMGPI study, which is now on its 11th year, as one of the leading sources of data on pension systems around the world.


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 Co-operation and Development data to represent a broader group of retirees.


“By benchmarking global retirement income systems, the Melbourne Mercer Global Pension Index 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,” said Harold Tan, Wealth Leader, Mercer Philippines.


The MMGPI, supported by the Victorian Government of Australia, is a collaborative research project between the Monash Centre for Financial Studies (MCFS) – a research centre based within Monash Business School at Monash University in Melbourne – and professional services firm, Mercer.


Sustainability, adequacy and integrity of the Philippines’ retirement system


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 39.0 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.


“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 Tan. “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.”


Global ranking


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)


While the pension systems of different countries each have a unique set of circumstances, the report makes clear there are common improvements which can be made to the challenges all regions are facing.


“Systems around the world are facing unprecedented life expectancy and rising pressure on public resources to support the health and welfare of older citizens. It’s imperative that policy makers reflect on the strengths and weaknesses of their systems to ensure stronger long-term outcomes for the retirees of the future,” said Dr. David Knox from Mercer, the author of the study.


The MMGPI, supported by the Victorian Government of Australia, is a collaborative research project between the Monash Centre for Financial Studies (MCFS) – a research centre based within Monash Business School at Monash University in Melbourne – and professional services firm, Mercer.


2019 Melbourne Mercer Global Pension Index



About the Monash Centre for Financial Studies


A research centre based within Monash University's Monash Business School, Australia, the MCFS aims to bring academic rigour into researching issues of practical relevance to the financial industry. Additionally, through its engagement programs, it facilitates two-way exchange of knowledge between academics and practitioners. The Centre’s developing research agenda is broad but has a current concentration on issues relevant to the asset management industry, including retirement savings, sustainable finance and technological disruption. 


About Mercer


Mercer delivers advice and technology-driven solutions that help organizations meet the health, wealth and career needs of a changing workforce. Mercer’s more than 25,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a business of Marsh & McLennan Companies (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people with 76,000 colleagues and annualized revenue approaching $17 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.


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