From change management, to governance and administrative challenges, Mercer is helping businesses in the Philippines overcome employee retirement complexities.
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.
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.
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.
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.
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.
Mercer's experience in wealth management spans
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.
Let’s optimise your employee retirement plans and create a brighter future for all.
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.
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:
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.
|Defined Contribution Plans||19%|
|Defined Benefits Plans||31%|
Source: January 2021 Mercer Benefits Monitor
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.