Unified pension system: A fix for fragmented retirement schemes in the country?

With the Philippines' Social Security System (SSS) receiving a poor rating from a global pension index last year, a finance expert suggested that consolidating all state and private retirement schemes into a unified pension system would be an ideal and more sustainable move for the government.

- By DERCO ROSAL

"It would be wise to consolidate these various government and private sector retirement schemes and ensure the sustainability of the consolidated defined benefit plan," Joseph Cherian, CEO, president and dean of Asia School of Business, told Manila Bulletin in an email interview.

Why? Too many separate pension programs with different rules, making it so fragmented and difficult to navigate for both the regulators and contributors.

Cherian said changes in regulations would help fix the fragmented system that confuses Filipinos and leads to inefficiencies in “contributions, administration, regulation, as well as unintended overlaps, gaps in coverage, and sustainability risks.”

He said the government should review the laws that allowed the system to become “disparate.”

"Introduce legislation aimed at harmonizing the various retirement schemes," Cherian said, but noted that "any transition would require careful planning to protect both current and future retirees."

If this reform sounds quite difficult to translate into reality, Cherian said, measures such as shifting the risks from SSS to its contributors. This system works in countries like Singapore and Malaysia, he said.

Bearing the risks