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Philippines must move towards a universal social pension

10 Mar 2016

Typhoon Haiyan destroyed Candido's livelihood - a social pension would alleviate his worries (c) Carolyn Canham/HelpAge International

Over the last five years the Philippines has taken important steps to improve income security for older people, most notably in the introduction and expansion of a social pension.

Following an intense campaign led by Coalition of Services of the Elderly (COSE) and the Confederation of Older Persons Association of the Philippines (PDF) a social pension was introduced under the Expanded Senior Citizens Act of 2010. This mandated that a monthly social pension of PhP 500 (US$11) should be paid to older people over the age of 60 identified as "indigent", that is, without income and facing disability.

The scheme began implementation in 2011, initially prioritising older people over the age of 77, but has been expanding gradually through lowering the age limit. In theory, by the end of 2016, 1.4 million older people over the age of 60 should be receiving a social pension - that's 17% of all senior citizens.

How is the social pension working?

Today, COSE is launching a new study on the social pension four years after it was first introduced (PDF), partnering with HelpAge International and the Demographic Research and Development Foundation of the Philippines. The research studied the impact of the scheme, but also the methods of implementation.

We found that the pension has made a major difference to the lives of recipients and their wider families. It constitutes a third of the household income of recipients, and has helped meet food and health expenditures. Nevertheless, in spite of these positive impacts it is clear that the meagre benefit of PhP 500 per month is far too low to meet the basic needs of older people.

In terms of implementation, the key issue highlighted by the study is the means-tested nature of the programme. Although it is clear that most recipients of the pension are poor, there are many equally poor and vulnerable older people who are left out. Indeed, while the current scheme has helped to expand pension coverage, over half of senior citizens in the Philippines still receive no pension at all.

The proportion of people in the Philippines who receive a pension

The need for a universal social pension

In light of these findings, COSE believes the government needs to introduce a universal social pension that would ensure all Filipinos have at least a minimum income in old age. Preliminary findings of research into the feasibility of a universal pension have been published (PDF).

The research explores two commonly-held beliefs. First, that children should provide the main source of financial support for older people, and, second, that contributory pensions can provide the main answer to the pension coverage problem.

In reality, the high levels of poverty and insecurity among Filipino families limits the extent to which older people can rely on financial support, while also making it difficult for younger generations to contribute to a pension for their own future.

A universal tax-financed social pension would be simple and transparent way to ensure income security for all older people, while avoiding the inherent challenges of means-testing. A universal pension would have major impacts not only for older people, but also for their wider families. For example, a pension of PhP 2,000 to all older people over 60 would lift 3.2 million Filipinos out of poverty.

Is a universal pension affordable?

The obvious question is: can the Philippines afford a universal social pension? Costings undertaken as part of the study suggest we can.

While it may take some time to achieve the optimal scenario for a universal pension, low-cost options are feasible in the short term. Simply expanding the current social pension to all older people 60 and over would cost just 0.3% of GDP, which is low compared to other countries with social pensions. Projections also show that the cost could be kept stable into the future, even while indexing to inflation.

On the question of financing, a social pension could be funded as part of the broader process the government is already undertaking to increase fiscal space. However, we must remember that a universal pension is not simply a cost to government. Today's senior citizens have contributed to the nation in so many ways throughout their lives, from paying taxes, to raising families and contributing to economic growth. It is high time that this contribution is recognised.

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Emily Beridico
Country: Philippines
Job title: Executive Director, COSE

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