The country’s 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, now on its 11th year, as one of the leading sources of data on pension systems globally.

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 center based within Monash Business School at Monash University in Melbourne – and professional services firm, Mercer.

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.