Normal pension age is 60 with 120 months of contribution.

Basic

The monthly basic pension is PHP 1 000.

All pension payments are made 13 times 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 the long run, it is assumed that this ad hoc adjustment will be in line with price inflation.

Earnings-related

Earnings-related pension benefit depends on the greater of the following two average earnings: the average earnings over 5 years at 6 months prior to pension claim or the average earnings for the period in which contribution was paid. The benefit is the highest of PHP 300 + 20% of workers’ average monthly earnings + 2% of workers’ average monthly earnings for each year of service exceeding 10 years + PHP 1 000 or 40% of the workers’ average monthly earnings + PHP 1 000, whichever is greater.

Defined-contribution

From January 2021 a new mandatory provident fund known as the Workers’ Investment and Savings Program (WISP) was introduced. All workers participating in the SSS social insurance programme with monthly covered earnings of PHP 20 250 or above are automatically enrolled in WISP with a portion of their contribution being allocated to WISP. For 2021, the employer WISP contribution ranges from PHP 42.50 to PHP 425 pesos a month and the employee contribution ranges from PHP 22.50 to PHP 225 a month, depending on an employee’s monthly covered earnings.

The SSS plans to invest at least 75% of fund members’ assets in low-risk government securities and the remaining portion in blue‑chip corporations. Investment returns are tax free, and the principal is protected by the government. The government projects an average annual rate of return of 4.5% for WISP savings.

At retirement, a fund member’s total accumulated assets are converted into an annuity that is paid out over at least 15 years. In the event of a fund member’s death, the member’s total account balance is paid as a lump sum to designated beneficiaries. Early withdrawals from WISP accounts are not permitted.

Minimum

The minimum pension for both basic and earnings-related components is PHP 1 200 a month with a contribution period of between 10 years and 20 years and PHP 2 400 + PHP 1 000 for more than 20 years of contribution.

Early retirement

The pension cannot be claimed before age 60 but is suspended if an old-age pensioner resumes employment or self-employment before age 65.

Late retirement

People can start claiming pension later than normal pension age, but there is no increment for the delayed pension benefits.

Taxation of workers

Taxation of worker’s income

For resident individuals, income tax rates and bands are as follows for 2022:

Social security contributions payable by workers

Workers pay 4% 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 PHP 25 000. This will increase to 5% by 2025 with a ceiling of PHP 35 000.

Taxation of pensioners

Under the Expanded Senior Citizens Act of 2003, senior citizens (resident citizens of the Philippines at least 60 years 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.

Taxation of pension income

All pension incomes are exempt from taxation.

Social security contributions payable by pensioners

Pensioners do not pay any social security contributions.