Philippines. Millions sans pension a ‘ticking time bomb’

Philippines. Millions sans pension a ‘ticking time bomb’

The massive protests over the highly unpopular legislation that France passed, raising its retirement age from 62 to 64 to save its pension system, may be a window to a similar future in the Philippines, with its own “ticking time bomb” in its pension scheme.

University of the Philippines School of Labor and Industrial Relations (UP-SOLAIR) professor Emily Christi A. Cabegin warned of this scenario, where the government may have to spend millions of pesos to take care of thousands of informally employed workers, who are not covered by a pension scheme, once they retire.

“Because of our demographic transition, there will be more elderly people in the coming years than there are now, so the government will have to allocate more funds in order to keep them at least out of the poverty level,” Cabegin told the BusinessMirror in an interview at the sidelines of the Home-based and Informal workers forum in UP Diliman at the weekend.

Currently, she said about 8 of every 10 workers are informally employed and therefore not covered by labor laws and mandated to become members of the Social Security System (SSS).

The country currently has over 51 million workers.

While the informally employed may opt to become voluntary members of SSS, they would have to do so at great cost since they would have to pay it on their own, without the share from employers—which their formally employed counterparts enjoy.

This has led to only a few informally employed people joining the SSS. As of 2021, SSS reported that only 3.36 million of its 40.52 members are self-employed.

Legislative remedy

The labor expert said a possible remedy to a dire situation in future could be including a provision in the latest version of the Magna Carta of Workers in the Informal Economy (MACWEI) bill to create a social security scheme, to be partly funded by the government, for the informally employed.

The MACWEI bills have been pending in Congress for over a decade.

Such legislation, Cabegin explained, will allow more informally employed people to afford SSS membership, granting them not only pension in the future but also much-needed social security coverage to boost their current productivity such as sickness benefit, maternity benefit, unemployment benefit among others.

“If you are going to cover them right now under the social security [system], you don’t have to worry about covering them in the future because they already have a pension,” Cabegin said.

She stressed that the “window” for the government to implement the reform should be in the coming years, when most of the informally employed are still in the working age.

Based on the latest Census of the Philippine Statistics Authority (PSA), the bulk or over 69.39 million of the country’s 108.67 million population are below the 65-year-old retirement age as of 2020.

Meanwhile, there are over 5.8 million who are aged 65 and above.

With the country’s declining fertility rate, which slowed down to 1.9  last year, Cabegin said the country’s pension system will eventually be strained by shifting demographics.

“It will be more difficult for a lower working age population to support a bigger elderly population,” Cabegin said.

Pension reform

The current administration is already engaged in a similar pension reform as it tries to fix the “unsustainable” pension for military uniformed personnel (MUP).

No less than the Department of Finance (DOF) made the proposal to cut the government expense for MUP pension, which is expected to cost the government over P800 billion in the next 20 years.

Under the existing pension scheme, MUP pensions are shouldered by the government.

Finance Secretary Benjamin E. Diokno suggested gradually requiring MUPs to contribute for their pensions to reduce government expenses.

DOF is coordinating with the Department of Defense, Department of the Interior and Local Government (DILG) to thresh out the details of the said reform.

The Legislative-Executive Development Council (LEDAC) has included the bill on pension reform for MUP in the list 41 priority measures of the administration.

However, the MACWEI is not on that list.

Source: Business Mirror