Key indicators: Philippines | |||
|---|---|---|---|
Philippines | OECD | ||
Average worker earnings (AW) | PHP | 197832 | 1949106 |
USD | 3977 | 39178 | |
Public pension spending | % of GDP | 7.7 | |
Life expectancy | at birth | 72.1 | 80.2 |
at age65 | 14.5 | 19.1 | |
Population over age65 | % of working- age population | 9.6 | 30.2 |
Benefit calculation
The monthly basic pension is PHP300.
All pension payment is made 13times per year in the Philippines. Indexation rule for all pension payment is decided periodically based on price inflation and wage growth and on the financial state of the fund. In a long run, it is assumed that this ad hoc adjustment will be in line with price inflation.
Earnings-related pension benefit depends on the greater of the following two average earnings: the average earnings over5years at 6months prior to pension claim or the average earnings for the period in which contribution was paid. The benefit is the highest of the basic pension plus 20% of workers’ average monthly earnings plus 2% of workers’ average monthly earnings for each year of service exceeding 10years + PHP1000 or 40% of the workers’ average monthly earnings + PHP1000, whichever is greater.
The minimum pension for both basic and earnings-related components is PHP1200 a month with a contribution period of between 10years and 20years and PHP2400 for more than 20years of contribution + PHP1000.
There is a social assistance payment of PHP500 per month for those that do not have a pension from any source.
Variant careers
People could start receiving pension as early as age60 with 120months of contributions at 6months before retirement. The pension is suspended if an old-age pensioner resumes employment or self-employment before age65.
People can start claiming pension later than normal pension age, but there is no increment for the delayed pension benefits.
Personal income tax and social security contributions
For resident individuals, income tax rates and bands are as follows for 2020:
Annual taxable income | Tax-rate |
|---|---|
Up to 250000 | 0% |
250001 to 400000 | 20% |
400001 to 800000 | 25% |
800001 to 2000000 | 30% |
2000001 to 8000000 | 32% |
Over 8000000 | 35% |
Social security contributions payable by workers
Workers pay 4.13% of monthly gross insured earnings as social security contribution for pension, sickness and maternity and funeral benefits and the gross insured earnings are set based on 31 income classes. The maximum insured monthly earnings for contribution are PHP20250.
Under the Expanded Senior Citizens Act of 2003, senior citizens (resident citizens of the Philippines at least 60years old) are exempted from paying individual income taxes provided their annual taxable income does not exceed the poverty level as determined by the National Economic and Development Authority (NEDA) for that year. They are also entitled to a 20% discount on the price of some services and products, including medical services and medicines. The 20%discount then becomes a tax credit for the establishment concerned.
All pension incomes are exempt from taxation.
Social security contributions payable by pensioners
Pensioners do not pay any social security contributions.
Pension modelling results: Philippines in 2063 retirement at age65 (men)
Note: Real rate of return 3%, real earnings growth 1.25%, inflation 2%, and real discount rate 2%. All systems are modelled and indexed according to what is legislated. Transitional rules apply where relevant. DC conversion rate equal 90%. Labour market entry occurs at age22 in 2020. Tax system latest available: 2020.
Source: OECD pension model.
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Philippines
