Sun Life survey highlights inflation challenges for retirees in Asia

Retirees in the Philippines are struggling financially amid high inflation, according to a Sun Life Asia survey.

Many of them lament past financial decisions, citing inadequate savings, poor investment choices and early retirement as key sources of regret.

Results of the survey, "Retirement Reimagined: Facing the Future with Confidence" — comprising 3,500 respondents across Asia, including the Philippines — showed 73 percent of Filipino retirees regretted not saving enough, 47 percent wished they had invested more wisely and 38 percent felt they retired too early.

A significant 25 percent said they have been caught off guard by the high cost of living, with 77 percent citing increased general living expenses and 46 attributing it to health care costs.

Despite efforts in savings, the Filipino participants admitted failure in financial preparation. While a number of them managed to save at least 10 percent of their income for retirement, 37 percent said they did not save at all and 21 percent did not foresee their retirement expenses, forcing them to cut back on spending or seek financial support from their respective families.

Inflation has worsened the situation. The Philippines is suffering more from high inflation rates than the Asian average, the survey said.

Consumer price growth hit a 14-year high of 8.7 percent in January 2023, which led the Bangko Sentral ng Pilipinas to tighten its monetary policy.

To date, inflation has settled within the 2.0- to 4.0-percent target range of the central bank at 3.4 percent and the average core inflation to around 2.4 percent, following the four-year low of 1.9 percent in September.

Carla Gonzalez-Chong, Sun Life Philippines chief client experience and marketing officer, stressed the value of financial literacy in addressing these challenges.

"Financial literacy remains key," she said. "We are committed to this advocacy to help more Filipinos overcome the obstacles and enjoy quality lives in their golden years."

The survey also revealed a growing trend among young Filipinos to delay retirement in response to rising living expenses.

Some expect to retire at an average age of 65, significantly later than the current retirees' average of 58. Many younger workers have postponed their retirement plans, with 59 percent citing the necessity of sufficient savings and 46 percent mentioning the demands of covering for increasing expenses.

Source: Business World and Sunlife

How to age well in Asia and the Pacific

The Asia and the Pacific region is aging rapidly. Older people, those aged 60 and above, accounted for 13.5% of the region’s population in 2022. That figure is expected to nearly double to 25.2% by 2050.

Such unprecedented population aging is happening at lower incomes than when advanced economies faced such demographic change. The sheer speed and scale of aging, coupled with the heightened vulnerability of older persons, underscores the urgent need for the region to promote the well-being of older people.

Four interconnected dimensions are important for old-age well-being, namely health, productive work, economic security, and social engagement. Health is central since it can keep older people productive, economically secure, and socially engaged. The four dimensions are closely linked. Some are inherently mutually reinforcing such as health and social engagement while others can create unintended consequences such as the work disincentives of generous pension benefits.

Economic and social progress in the region has sharply reduced poverty, tangibly improved quality of life, and significantly extended longevity. Yet the well-being of current and future cohorts of older people is at risk from multiple threats. For instance, 57% had at least one diagnosed noncommunicable disease, 31% had elevated depressive symptoms, 40% had no pension, either contributory or social, and 16% felt lonely most of the time.

As such, older people in Asia and the Pacific face vulnerabilities across all four key dimensions of old-age well-being. Furthermore, a yawning inequality separates older people in health, productive work, economic security, and social engagement.

More specifically, well-being in old age is impeded by pervasive informal employment and stark gender inequality. Very few informal workers in the region enjoy protection from disabling illness or injury. Informal workers enjoy little or no paid leave, disability allowance, or pension, or other option to prepare financially for old age. Many have little choice but to work as long as their health permits.

Women can expect to live longer than men but are more prone to disease and therefore insecurity in old age. Gender inequality has narrowed in some areas but persists institutionally, such as in pension systems that tie benefits to contribution periods without allowing for the greater family demands that cultural norms place on women. Time spent on housework and family care constrains women’s economic opportunities and leaves them vulnerable in old age.

Old-age well-being is thus a work in progress in the region. A key policy agenda across the region is to ensure the well-being of older people by helping them to age well. Well-being in old age can be enhanced by individuals’ lifetime investment in their own health, education, skills, financial preparedness for retirement, and family and social ties.

Policies for aging well should therefore actively promote healthy lifestyles, lifelong learning to update skills and learn new ones, and long-term financial planning for retirement.

Promoting well-being in old age has fiscal costs, but countermeasures can help contain them. In particular, public and private investment in human capital — beginning in the cradle with preventative and curative healthcare, followed by lifelong education — can generate over time bigger silver dividends as healthy and educated older people become more productive. The silver dividend or additional productivity that could be gained from untapped work capacity among older persons is substantial and could equal up to 1.5% of gross domestic product for some economies in the region.

Governments must do more to empower people to plan and prepare for old age. They can disseminate information and raise awareness to help workers of all ages set realistic expectations about future retirement needs, taking into account that future policies may change the retirement age and pension terms. They can also support initiatives that help firms and workers themselves develop career plans and retirement paths in anticipation of longer working lives.

A lifelong, life-cycle, population-wide approach is needed to meet the aging challenge. Evidence presented in this report lends strong support to a three-pronged approach to aging well: A lifelong approach encourages continuous investment in human capital throughout people’s lives. A life-cycle approach provides adequate intervention in accordance with age-specific needs. And population-wide outreach targets people of all ages.

Comprehensive aging policies can ensure a healthy and productive older population with autonomy and ability to offer a large silver dividend, the economic and social contributions made by older people.

Future generations of older people in Asia and the Pacific will live healthier and longer lives and be more educated. To leverage their full potential to the benefit of their own well-being and the broader society, it is time for governments to take action to improve all four dimensions of well-being in old age.

If they do, people of all ages can aspire to live well and age well.

asian-development-policy-report-2024.pdf

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Source: Business World and ADB

Retirement Benefits in the Philippines: A Guide for Seniors

Granted, you may still be several years away ‘til your hair turns grey, but eventually after surviving the proverbial midlife crisis, you’ll start scurrying for documents regarding your retirement benefits. Perhaps you’re also concerned that your parents have just turned 60 and wondering if they qualify for a pension or any lump sum to tide them over in their senior years.

Regardless of your reasons, we’ve rounded up the important must-dos and steps for availing benefits from the Social Security System (SSS) to ensure a smooth financial transition into retirement so you and your abuelos won’t miss out on the fun of post-work years.

SSS Retirement Benefits

If your parents or seniors were previously employed by private companies or informal sectors, or voluntarily contribute to the SSS, they could be eligible to receive retirement benefits. This is where their hard-earned salary deductions and contributions go, ensuring that they have a financial safety net once they reach the mandated retirement age. Whether in the form of a monthly pension or a lump sum, SSS enables its old members to live a comfortable life post-employment.

While the Filipino family culture often dictates that children must provide and look after their parents in their old age, having your own savings in your senior years will help pay not only for R and R but also for typical old-age issues like maintenance medications and day-to-day sustenance. Thus, having their SSS records handy is necessary to access benefits claims and prevent financial hiccups upon entering retirement age.

Eligibility for SSS Retirement Benefits

Although SSS offers retirement benefits to its active members, your parents must pass the eligibility criteria to be able to claim a pension or a one-time cash award.

Basically, when a member reaches at least 60 years of age and is no longer employed or working, he is automatically eligible for retirement benefits under SSS. However, some contributors, especially those in the informal sectors or microbusiness owners, may have extended their retirement age to 65 years, at which point it is mandatory that they stop working and would be eligible for a pension or lump sum amount.

Additionally, while they may have reached retirement age, they need to have made at least 120 monthly contributions to the SSS before the semester of retirement. The number of their contributions would be the basis for the amount they will receive as benefits.

Types of SSS Retirement Benefits

SSS offers two main types of retirement benefits upon entering post-employment age:

• Monthly Pension. A lifetime cash benefit paid monthly to retirees who have paid at least 120 monthly contributions. This ensures consistent funds withdrawable from the SSS proceeds accounts.

• Lump Sum Amount. A one-time payment given to retirees who have not accumulated the required 120 monthly contributions. Good news: your parents or "abuelos" will still be given the option to complete the 120 required contributions until they qualify for a monthly pension, even if they reach 60 years old at the time of making retirement claims. However, their pension may be adjusted further until 65 years old if they decide to continue working, either as self-employed or as returning employees.

SSS Monthly Pension Computation

The monthly pension is calculated based on the retirees’ paid contributions, credited years of service, and the number of dependent minor children (which must not exceed a brood of five). Moreover, your retired folks’ monthly pension upon reaching 60 will be readjusted if they decide to re-enter the workforce or self-employment until 65 years old, which means they may get a higher amount per month as a pension.

The computation of the SSS monthly pension involves three formulas, with the pension amount being the highest result from these formulas:

P300 + 20% of the average monthly salary credit (AMSC) + 2% of the AMSC for each credited year of service (CYS) beyond ten years + P1,000.

40% of the AMSC + P1,000.

P1,200 if CYS is 10-20 years; P2,400 if CYS is more than 20 years + P1,000.

Sample SSS Monthly Pension Computation

Suppose the member has an AMSC of P25,000 and 30 years of service. Using the first formula, their monthly pension would be calculated as follows:

Monthly Pension = P300 + (20% of AMSC) + [2% of AMSC x 20 years] + P1,000 = P300 + P5,000 + P10,000 + P1,000 = P16,300

Additional Benefits

If you think a pension is all they’ve got, you’ll be happy to be proven wrong.

• Automatic PhilHealth registration. Per RA 7875, they’ll be entitled to full coverage of primary PhilHealth-accredited services. And not only will they benefit from hospitalization benefits, but also their dependents who are not over 21 years old.

• 13th-month pay. Retirees surely won’t miss the fun of Christmas time with the "extra" amount they’ll receive every December on top of their regular monthly pension.

• Funeral benefits. While it’s too early to think about this, it’s comforting to know that their insurance plans may be complemented with funeral benefits from SSS for your peace of mind.

Lump Sum Retirement Benefit

Alternatively, if your parents do not qualify for the monthly pension due to insufficient contributions, the lump sum amount would be their go-to fund. This is a one-time payment that equals the total contributions made by the member and their employer, plus interest.

But don’t worry, you or your parents may initiate payment of the remaining contributions to qualify for the monthly pension instead. Take note that they’ll only be able to choose either a monthly pension or lump sum amount for claiming retirement benefits.

How to Apply for SSS Retirement Benefits

1. Ensure your parent/grandparent meets the eligibility criteria.

2. Prepare the necessary documents, including a filled-out Retirement Claim Application (RCA) form.

3. Submit their application at the nearest SSS branch or through the SSS online portal.

Eligibility Criteria

• Age Requirement

• Optional retirement: Your retiree parent/abuelo must be at least 60 years old and no longer employed.

• Compulsory retirement: Your folks must be 65 years old, regardless of employment status.

• Contribution Requirement. Your parent or abuelo must have made at least 120 monthly contributions to the SSS before the semester of retirement to qualify for a monthly pension. Otherwise, he will be given the option of a lump sump amount instead, which is a one-time award.

Steps to Apply

1. Verify Eligibility. Confirm that they meet the age and contribution requirements.

2. Prepare Required Documents. Necessary documents typically include their SSS ID or two valid IDs (one with a photo and both with a signature), a completed Retirement Claim Application (RCA) form, and possibly additional documents depending on your situation (e.g., marriage certificate, birth certificates of minor children).

3. Submit Their Application. You can process their application along with them at the nearest SSS branch or via the SSS online portal for registered members. The online option offers convenience and accessibility for those unable to make a physical appearance at the SSS office.

4. Await Approval and Benefits Release. Once their application is submitted, it will be processed by the SSS. Upon approval, they should start receiving their retirement benefits, with the payment method being arranged during the application process.

Note that you can only receive either the monthly pension or the lump sum amount, not both.

Additional Tips

• Consult the Official SSS Website. For the most accurate and up-to-date information on retirement benefits, application processes, and eligibility, always refer to the official Social Security System website or contact their helpdesk directly. This is advisable if you’re processing the retirement benefits on your parents/abuelos behalf.

• Stay Updated. Policies and procedures may change, so it's important to stay informed about any updates regarding SSS retirement benefits to ensure a smooth application process. After all, parents of older generations may not easily catch up with the latest technologies (hello, SSS app) that this agency employs these days.

Source: Spot