State-run policy think tank Philippine Institute for Development Studies (PIDS) said persistent gaps in old-age income security could weigh on the Philippines’ long-term growth prospects, as limited pension coverage and high labor informality leave a large segment of the elderly financially vulnerable even as the country nears upper-middle-income-country (UMIC) status.

In a policy note titled “From Targeted Aid to Universal Dignity: Can the Philippines Sustain a Universal Old-Age Pension?” published last Wednesday, March 25, PIDS said that while the country has a targeted social pension program, coverage remains thin relative to the size of the aging population. The study was authored by Jose Ramon G. Albert and Vicente B. Paqueo, senior research fellow and distinguished visiting research fellow at PIDS, respectively.

The think tank noted that a significant share of Filipino workers remains in the informal sector, limiting their access to contributory pension systems such as those managed by the also state-run Social Security System (SSS) and Government Service Insurance System (GSIS). As a result, many retirees rely on limited government assistance or family support, creating uneven income security in old age.

A universal old-age pension—defined as a publicly funded benefit granted to all senior citizens regardless of employment history or prior contributions—has resurfaced in legislative discussions as policymakers seek to broaden social protection. The proposal is “again on the agenda” in Congress as lawmakers respond to demographic shifts, rising living costs, and the inadequacy of existing targeted pensions to fully protect vulnerable elderly populations, PIDS noted.

However, PIDS emphasized that the central policy challenge is fiscal sustainability rather than desirability, citing that the Philippines’ public debt has exceeded 60 percent of gross domestic product (GDP), while competing budget demands—from infrastructure to social services—limit the government’s fiscal space for large-scale entitlement programs.

The policy note warned that a fully universal pension scheme could entail significant and recurring fiscal costs, particularly as the country’s elderly population expands over time. Without careful design, such a program could place additional pressure on public finances and potentially crowd out other priority expenditures, it added.

Drawing on international experience, the authors said countries that successfully introduced universal pension systems typically did so gradually. These approaches include phasing in eligibility by age group—starting with the oldest cohorts—offering modest initial benefit levels and adopting layered systems that combine universal benefits with existing contributory schemes.

Such models allow governments to manage fiscal risks while progressively expanding coverage, ensuring that pension reforms remain aligned with economic capacity and revenue generation, PIDS said.

The policy note underscored the need for a calibrated and data-driven approach to pension reform. This includes strengthening contributory systems to expand coverage among informal workers, improving targeting mechanisms for existing social pensions, and sequencing any move toward universality in line with fiscal conditions.

PIDS added that achieving “universal dignity” in old age will require more than expanding benefits. It will depend on broader structural reforms, including efforts to formalize the labor market, enhance productivity, and sustain economic growth—factors that ultimately determine the government’s capacity to finance long-term social protection programs, according to the think tank.