Retirement for Filipino professionals

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In the Philippines, we have separate retirement schemes for those who are employed in the private sector and those in government. Private sector employees are covered by the Social Security System (SSS), while its counterpart is the Government Service Insurance System (GSIS). Both are mandatory, which means that employees and employers alike cannot opt-out of paying premiums, even if they think they can get better returns by investing somewhere else. As long as you’re employed, the government requires that your HR department deduct the right amount from your salary every month and remit it to SSS or GSIS. Both SSS and GSIS are to make sure that Filipino workers retire with a pension.

To have a strong basis for our retirement planning and investing strategies, it is imperative that we understand how these schemes will look like for the regular Pinoy professional. For those of us in the small FIRE (financial independence, early retirement) movement in the Philippines, we need to find out our baseline so that we can have a basis for our computations and how we should allocate our money.

In this post, I will focus on the monthly pensions under the two schemes. I will not include side benefits such as burial benefits and 13th-month bonuses, which aren’t that substantial anyway.


Under the current scheme introduced in May 2019, the rate of contribution for SSS members is a total of 11 percent of their monthly salary capped at Php 20,000. Based on this salary cap, the employee pays 3.63 percent while the employer pays 7.37 percent, a total of 11 percent. If you fall under the highest range of compensation group, you will be deducted Php 800.00 and your employer will contribute Php 1,600.00 a month. totaling to Php 2,400.00. Likewise, if you’re a voluntary member (self-employed or an OFW), you pay for the entire contribution, which totals Php 2,400.00

The salary cap is important because your pension will be pegged to that limit. In a sense, it doesn’t matter how much your actual salary is in terms of retirement after your basic salary reaches Php 19,750. Why? Because your pension will never be based on an amount more than Php 20,000 until the regulations are changed. A salesperson with a basic salary of Php 20,000 a month and an executive with a basic salary of Php 150,000 a month will have the same salary cap of Php 20,000 as the basis for their pension benefits. Of course your salary matters in many ways outside of SSS monthly retirement pension computation.

SSS published a guideline on how to calculate monthly pension but let’s forget this complicated system and just go direct to the point. We’ll assume that when you will retire after 30 years of working and that you will receive the highest monthly pension for SSS retirees possible which was Php 10,900 when SSS made an official computation. They have yet to release information as to how much the maximum will be after the May 2019 increase in premiums.  Even with the resulting increase in the monthly pension, I doubt the updated maximum monthly pension that pensioners will receive will increase considerably.

Until we get more official calculations from SSS, I will use the latest information they used to have (Php 10,900 maximum monthly pension). SSS retirees have the option to receive the first 18 months of their monthly pension in a lump sum (minus a preferential interest determined by SSS). So you’ll start your retirement with Php 196,200 (around US$ 3,700) in cash, minus preferential interest, and then wait for 19 months before you receive your first pension check.  No traveling around the world for you; US$ 3,700 will get you as far as, maybe East Asia, or Thailand, or Cambodia maybe, but no further.

Let’s say that you’re married to another SSS retiree and both of you receive the maximum monthly amount. As a couple, you will get Php 21,800 a month. In today’s exchange rate, that’s less than 500 US dollars.

The question you need to ask yourself is, will this monthly pension be enough to maintain the lifestyle you have built over the decades? Even if you do decide to downgrade your lifestyle, will Php 21,800 a month for two people be enough? For most, the amount is very, very far from enough.

What retirement looks like for SSS beneficiaries

If you’re a badass professional, and I assume you are since you read this blog, Php 10,900 for one person and Php 21,800 for two people will not be enough. Even if you consider yourself a simple person with inexpensive tastes and a fully paid-off home, that monthly pension will barely cover your basic needs, what with the increasing costs of healthcare and utilities, as well as the unstable inflation in the country.

If you’re thinking of relying on your SSS benefits to fund your golden years, you’re going to have a tough time. Obviously, SSS is not committed to making your golden years golden. The monthly pension is barely enough to provide only the most basic of necessities. You won’t be able to travel the world like you thought you would. You won’t be able to afford to give your grandkids gifts so you’ll be their favorite grandparent. You’ll barely have enough to maintain yourself.

If you retire with little to no savings and investments thinking that your SSS pension will be enough, prepare to be shocked. Like this retiree who worked for 35 years and got the shock of his life when he was informed that his monthly pension was only Php 4,300.

If you’re thinking that by the time you’re set to retire that the laws will have already changed so that retirees will have more money, you’re only deluding yourself. Increasing SSS contributions and benefits is a politically fraught issue. Even calls to increase benefits for an additional Php 1,000 a month become subject of intense political wrangling and debate. Do you really want to spend the rest of your life worrying whether or not politicians will agree to give you an extra 1,000 or 2,000 a month? Is this the kind of shit you want to be thinking about in your old age?


If you’re a government employee, you may be better off in retirement than those who were in the private sector. Government employees have to contribute a higher percentage of their monthly salary towards retirement, with employees paying 9 percent and the government paying 12 percent, totaling to 21 percent. Because of this, government employees can have higher monthly pensions than their counterparts in the private sector.

Unlike SSS retirees, GSIS retirees do not have a maximum limit on their monthly pension. So the higher your salary is when you retire, the higher your pension will be.

We’re all ballers here so I assume that if you’re working in government, you’re projected to at least will have a salary grade of 24 or 25 (it seems to be the realistic intersection between high-performing staff and officers, according to friends in public service). So let’s say that you served in government for 30 years and you retired as a say, director of a government agency with a salary grade of 25, your retirement benefits will computed thus:

basic monthly pension = (0.025*) x [(member’s total compensation prior to retirement/36 months) + 700**] x (periods with paid premiums)

The longer you are in a high position, the higher your total compensation prior to retirement will be, which in turn will pull up your basic monthly pension. The best way for you to have a bigger monthly pension if you’re in government is for you to be promoted to the highest possible position that you can be promoted to. To give you an idea, salary grade 25 is Php 95,083 currently under the fourth tranche of the Salary Standardization Law. Obviously, you can’t be promoted to Salary Grade 33, which is for the president, but you can work to be appointed to executive director or assistant secretary positions.

Once you hit retirement age, you also have the option to get a 60-month lump sum or an 18 month encashment. If you choose to get the 18 month encashment, you will receive the equivalent of 18 months of your monthly pension and you will get your first pension check on the same month of your retirement. This is different from the SSS scheme wherein SSS retirees have to wait until the 19th month before getting their first pension check if they opt for an 18-month lump sum. GSIS retirees don’t need to wait before getting their first check.

If you choose to get the 60-month lump sum, you will get the equivalent of 60 months worth of monthly pension. Your first pension check will arrive on the 61st month.

* constant

** the additional 700 is a constant

What retirement looks like for GSIS beneficiaries

If you’re a long-time government employee who retired at a higher rank, you’re much better off than your counterpart in the private sector. The 60-month lump sum payment (and I suggest you claim this benefit instead of the 18 month encashment) that you can claim at the end of your service can be used to finance business ventures or just to travel the world. If you retire in say, salary grade 25 after 30 years of service, the 60-month lump sum can total up to several millions of pesos.

All things being equal, you’re in a much better position financially once you retire compared to your friends in the private sector if both of you (1) have no other investments and savings for retirement and (2) plan to completely rely on your government-mandated retirement benefits alone.

Although it is not ideal to completely rely on GSIS for your retirement, your situation is not as dire as a private-sector retiree. In fact, compared to them, you’re basically living the life! Again, the assumption here is that you will retire in a management/ or any high position in government.


Since we’re all here to win at life and enjoy our retirement – many of us in the FIRE movement want to retire as early as our investments will allow – we won’t actually be caught dead in these dire scenarios. The purpose of this post is to put into perspective where we will be if we hit retirement age and our only plan is to collect a pension from either SSS or GSIS.

To recap, if you’re in the private sector and have no investment for retirement, your golden age is going to suck unless you plan on requiring your offsprings to feed, shelter, and clothe you. If you’re a government employee, you may be comparatively better off BUT only if you retire at a high rank. If you retire with a salary grade in the teens or low 20s, your monthly pension won’t be as substantial as your higher-ranking colleagues in government.

These monthly pensions will not be enough to maintain your lifestyle in your old age, especially if you want to have an enjoyable and comfortable retirement.

So what to do? One of the best and most affordable measures we can take to ensure a happy and well-funded retirement is to open a PERA or Personal Equity Retirement Account, which is tax-free and bankruptcy-proof. To learn more about PERA, read my post outlining its benefits and why we need to open an account right now.

If you’re still confused with it all and don’t know where to start, educate yourself on how to manage your finances to prepare you to eventually invest for retirement. Here’s my post sharing my strategies on how to have a total money makeover in the Philippines, as inspired by Dave Ramsey.

I hope that this post will provide clarity in our conversations about how retirement will look like for a regular Pinoy professional. It doesn’t look pretty but that’s where we are now, and this will likely stay the same in the coming years. Although we’re hoping for better retirement options and safety nets for retirees, we should hope for the best and plan for the worst.

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What retirement Looks Like

Katie Scarlett

Katie Scarlett

is a personal finance advocate working towards achieving financial independence and early retirement (FIRE).

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9 Responses

  1. Hi Katie,

    I’m curious, why did you recommend getting the 72 month lump sum over the 18 months? Isn’t choosing the 18 months just like getting free money since there’s no waiting period before you can get your pension?

    My dad chose the 72 month option and I’ve always wondered why he did so. Maybe it’s because 72 months worth of salary is so much more impressive to have than just 18 months? But the long wait is such a buzzkill and my dad spent his 72 month package in less than 2 years, so the next 3 years were spent waiting for his monthly pension will kick in.

    Great blog btw 🙂

    1. Hi Jill,

      Thanks for dropping by! 😀

      My reasoning for the 60 month lump sum is control; you will have more control on your retirement money by putting it on other types of investments to at least match or even beat inflation, or as additional capital to your hopefully already existing business (I don’t suggest that people use their retirement money to fund a business for the first time). You’re right, the 18 months is basically free money since you will get a monthly pension afterward. But I think this is an opportunity to get a huge amount that they can then divide between living expenses for the next 5 years while putting the remaining money on tiered investments that can match or beat the inflation. I think especially for the ambitious young people in government who will retire in 25-30 years, the 60-month lump sum can actually amount to 1x million or more if salaries are adjusted regularly. So say, put some of that money on CDs or time deposits that will mature in the next years when you think you’ll need the money while putting some aside for more long-term goals since people are living longer and longer nowadays thanks to science. Instead of relying on your monthly pension(the value of which diminishes annually due to inflation), you can actually use the lump sum to further diversify your retirement fund sources.

      Edited to reflect that I’m a dumbass and that 5 years only have 60 months.

      1. Hey. I wonder why you said 72 months lump sum? Shouldnt it be 60 months?

        “SECTION 13. Retirement Benefits. — (a) Retirement benefit shall be:

        “(1) the lump sum payment as defined in this Act payable at the time of retirement plus an old-age pension benefit equal to the basic monthly pension payable monthly for life, starting upon expiration of the five-year (5) guaranteed period covered by the lump sum; or

        “(2) cash payment equivalent to eighteen (18) months of his basic monthly pension plus monthly pension for life payable immediately with no five-year (5) guarantee.

  2. PERA is a good alternative but not as good as the 401k for US persons since the limit is 100k only per person per year. Our (my wife and I) PERA account under BPI is now under process and for anyone who had a hard time applying for PERA with BDO both online and in their main office (which we did), I highly recommend Joyce Natural of BPI Asset Management . She walked us through the paper works, explained things we needed to know and is very professional. – Carlo

  3. Hi KatieScarlett, really great Blog you have here. Recently followed you on FB too! Would you recommend doing voluntary SSS contributions for OFW’s or Self Employed individuals or would our money be better invested elsewhere?

    1. Hello Meng.

      For ‘investment’ or retirement purposes, absolutely not. But, I will still encourage you to contribute to SSS as Ofw or self-employed if you can afford it because our contributions finance the retirement of elderly Filipinos.

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