Retirement planning in the Philippines is evolving – so are the challenges

While companies in the Philippines have traditionally gone with Defined Benefit (DB) pension plans, increasing cost pressures are driving more businesses to shift to Defined Contribution (DC) plans. But, DC plans present their own set of challenges involving change management, governance, and administration. Adding to the complexity is the call for companies to provide employees with expert advice on how to invest their pension funds.


Pension reform in the Philippines is underway

With increased attention on financial security and wellness in the Philippines, employee pension schemes now play an important role in your talents’ decision to stay with your company, or move on. Worryingly, a large number of companies in the Philippines have no formal employee retirement plan, and no funding strategy even for the government-mandated retirement law payment.


of companies in the Philippines do not have a formal retirement plan, fulfilling only the minimum mandated by retirement pay law.


The Philippines' pension system has been ranked second lowest in Asia, and 41st out of 43 retirement systems in the 2021 Mercer Global Pension Index.


A well-designed pension fund is win-win for employees and employers

It’s true, retirement law in the Philippines does not require companies to provide pension funds. However, forward-thinking employers know that investing in employee retirement planning pays off. With the right pension governance in place, companies can deliver brighter futures for both their business and their employees.


Employee Benefits


Stronger financial security

Increased morale and job satisfaction

Improved financial wellness

Lower levels of financial stress

Better physical health



Employer Benefits


Improve talent attraction

Higher employee retention and productivity

Alignment with regulatory requirements

Decreased risk exposure

Potential tax savings



Backed with global experience and local expertise, let us help you

Mercer offers full-suite support for employee pension planning in the Philippines.

  • Pension fund design

    Build a pension fund that meets employee needs, adheres to government policies and saves costs. Mercer’s asset liability modelling service considers all aspects of pension planning, including persistent risks, market volatility, and pressure to reduce expenses.

  • Pension fund review

    Benchmark your existing pension fund to ensure competitiveness with the market. Mercer’s global experience gives us unique insight and expertise to help you hone your pension strategy, improving employee retirement incomes and optimising your company outcomes. 

  • Pension fund implementation

    Outsource administrative tasks to us. Relieve yourself of the headaches of managing the nitty-gritty of pension planning with Mercer’s implementation service that streamlines processes, educates your employees, and ultimately improves financial wellness for all. 

  • Pension governance

    Ensure your employee retirement planning aligns with the most recently updated government guidelines. At Mercer, we don’t just audit your existing strategy – we give you on-going support and tailored advice on how to keep up with industry changes, current and future.


Pension Planning that's a cut above the rest


Mercer's experience in wealth management spans

10,000+ clients

50+ countries


Few organisations have the unique combination of broad, global experience and deep, local expertise that is required to navigate the growing complexities of employee pension funds and retirement planning. If you want to build a more robust pension program that boosts employee retention rate and attracts top talent, but need help with sufficient funding – Mercer can help. 

Contact Mercer

Let’s optimise your employee retirement plans and create a brighter future for all.

Speak with a consultant

Mercer does not provide tax or legal advice. You should contact your tax advisor, accountant and/or legal advisor before making any decisions with tax or legal implications.

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FAQs about retirement and pension funds in the Philippines

  • 1. What is the retirement age in the Philippines?

    According to the Labor Code, the optional retirement age in the Philippines is 60, and the compulsory retirement age is 65. There is an exception, however, for underground mining employees, whose optional and compulsory retirement ages are 50 and 60 respectively. 

  • 2. What is the retirement pay law in the Philippines?

    An eligible retiring employee is entitled to retirement pay of at least his half-month salary multiplied by the total number of years of service. A fraction of a year is calculated as a whole year if at least six months are served.

    The term “half-month salary” for retirement pay purposes generally refers to:

    1. The 15-day salary of the employee based on his latest salary date; plus
    2. Cash equivalent of five days of service incentive leave; plus
    3. 1/12 of the 13th month pay due to the employee; plus
    4. All other benefits that may be agreed upon between employee and employer.
  • 3. What is the difference between defined benefit vs defined contribution?

    Defined benefit (DB) pension plans are when the employer commits to a specific amount to be paid out to an employee upon retirement, usually based on factors like salary and years of service. Defined contribution (DC) pension plans require more involvement from the employee, who is responsible for funding and investing their own pension fund.

    While DB plans have traditionally been more popular with employers, there is a general shift towards DC plans, especially in the face of increasing pressures for companies to cut costs. But with the shift to DC plans, there are challenges in change management, governance, and administration, as well as the increased need to educate employees or provide them with expert advice to guide their investment decisions.

      General Industry
    Defined Contribution Plans 19%
    Defined Benefits Plans 31%
    Both 19%
    None 31%

    Source: January 2021 Mercer Benefits Monitor

Asia Retirement Survey Reports


Conducted over 2019 to 2021, this series leverages our client base across Asia, and aims to bring together common issues in retirement security that Asia business leaders, HR and Finance partners can take action on.



Find out more


Reimagining retirement in the Philippines


As work-life transformations are still being shaped by the pandemic, another aspect of employment that is also evolving in the Philippines is employee benefits, particularly pension plans.



Learn more