old age pensions in the Philippines

In January 2017, the government of the Philippines increased social security pensions by 1,000 pesos (19 US dollars) a month without any increase in contributions. Simultaneously, the government reduced income taxes. A young Philippine economist writes that this was bad policy first because it increases government deficits and second because it helps the wealthy at the expense of the poor.

Fewer than a third of the country’s workers have access to any retirement pension at all. The vast majority of pensions are from the social security system, and the beneficiaries are not exactly poor. Increasing their pensions by increasing deficit spending does not help those who do not participate in the social security system, so have no entitlement to a pension in old age.

It would be much better, this economist believes, for government to introduce a universal pension, payable to all residents from the age of 60. I agree, and am pleased to see this call for a simple, universal pension in a country with so much poverty.

All in all, the yawning gaps of the country’s social pension system require bold, comprehensive, and forward-thinking solutions like universal social pension – not simplistic, superficial, and short-sighted ones like [Rodrigo] Duterte’s pension hike. ….

Back in January 2017, at Duterte’s behest and in partial fulfillment of his promise on the campaign trail, the Social Security System (SSS) hiked its pension benefits by P1,000 per month per beneficiary. ….

[T]hose lucky enough to get pensions are not exactly poor: as of 2013, 39% of SSS beneficiaries belonged to the richest fifth of the population, while only 4% were found in the poorest fifth. ….

One of the more prominent proposals now is a “universal social pension system,” which will automatically cover and guarantee a fixed income for every Filipino above a certain age, say 60.

This system – which is already in place in some of our neighbors – would greatly increase the scope of pension coverage especially among the poor and those in the informal sector. Moreover, it could improve healthcare access, lower depression, and abate poverty among the elderly.

But how much will universal social pension cost? Estimates in the Sevilla et al. study show that a monthly universal pension of P500 [US$9.50] per month per beneficiary will cost around 0.3% of GDP, while P1,500 per month per beneficiary will cost around 1% of GDP.

JC Punongbayan, “How Duterte endangers your retirement“, Rappler, 26 May 2017.

Jan Carlo B. Punongbayan is a Ph.D. candidate at the University of the Philippines School of Economics. He draws on an 86-page HelpAge study, “The feasibility of a universal social pension in the Philippines“, written by Charles Knox-Vydmanov, Daniel Horn and Aura Sevilla.


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