The Department of Trade and Industry (DTI) is calling on the business sector to support a measure allowing job hoppers to retain their pension fund savings in a single account.
The House Committee on Banks and Financial Intermediaries discussed on Monday House Bill 8938 or “An Act to Deepen the Capital Market by Developing a Robust Institutional Investor Base and Strengthening the Regulatory Environment,” which cites the portability aspect of the pension fund savings of the employees. The bill aims to reform the pension fund system in order to boost the capital market in the country.
“The savings being contributed to the pension fund will have a portability aspect wherein they can carry these from one job to another,” Trade Secretary Ramon Lopez said during the hearing. This is relevant, he explained, because younger workers today tend to hop from one job to another.
In a way, allowing the worker who are moving to another company to maintain their pension fund saving will ensure their financial protection, Lopez said.
“With a positive impact of a reinvigorated pension system to the economy and business, companies should support the measure,” the trade official reiterated. “This is part of being good corporate citizens.”
According to the bill, a portable employee pension and retirement income (EPRI) account is created at the start of the employment of the worker. It is the responsibility of both the employer and the employee.
The EPRI account shall be established under the name of the employees with their PhilSys Number (PSN). If such identification is not yet available, a pension retirement and income number shall be assigned for the mean time.
Employers Confederation of the Philippines (ECOP) President Sergio Ortiz-Luis Jr. told the BusinessMirror that the portability aspect of pension fund savings seems ideal “in principle,” saying he supports “anything that will make availment of the pension easier.”
Ortiz-Luis said pension fund savings are usually wasted when employees decide to move to another company. It would be beneficial if the workers will be able to keep an account where they can continuously pour in their savings, he added.
Still, the ECOP president explained that this initiative may require several undertakings as companies have their individual service providers, adding that the transition is something that the bill should consider as well.
For the part of Financial Executives Institute of the Philippines (Finex), it expressed support for the passage of the bill eyeing to bring changes to the current pension fund system as this can help both the employers and employees.
“This bill that is now under consideration is merely a step in providing a more flexible framework for employers to help their increasingly mobile workers accumulate enough in pension funds to finance portable life post-retirement,” Finex President Francisco ED. Lim said during the hearing.
Toward economic recovery
The trade official also pointed out that the bill can also contribute in helping the ailing economy due to the lockdown measures amid the pandemic. To recall, the Philippine economy contracted by 9.5 percent on average in the past year.
Having a “more secure” pension savings will allow the retirees to have a “decent quality of life through their sunset years,” he said. This provides a “stronger purchasing power,” enabling the retired workers to contribute in boosting local demand for the economy.
Greater demand is seen to bode well for the production sector in the country and attract more investments in the future, he added.
“There is a positive correlation with higher pension and higher real capital, with greater savings and investments creating more jobs for our people,” Lopez explained. “It has also been cited that these long-term savings are the right sources for long-term investments and there will be more funds for the likes of infrastructure and education.”
Passing the bill will also help develop the local capital market, Lopez said, which can improve the country’s pension fund assets to GDP (gross domestic products) ratio.
Citing 2016 World Bank data, he said that the Philippines registered only 3.5 percent, lagging behind Thailand, Singapore and Malaysia with 6.8 percent, 29.9 percent and 59.9 percent, respectively.
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