This chapter analyses protection gaps in retirement savings in Asia by learning from the experiences of several countries. It looks at the extent to which protection gaps may arise from the rules of the pension system, the availability of savings and retirement income vehicles, and the population’s use of the available vehicles. It then identifies the main drivers of the protection gaps and provides policy options to addressing those gaps.
Protection Gaps in Insurance for Natural Hazards and Retirement Savings in Asia
Abstract
Financial protection in old age is crucial for societies. There is usually a point in life when individuals’ capacity to work and earn an income from work declines. Tools exist to provide financial protection in old age and ensure that individuals still get an income once retired so they can cover their living expenses. However, individuals are not always able or willing to use these tools. This can lead to financial protection gaps that can leave individuals under-protected and put their financial well-being at risk in retirement.
Several factors may lead to financial protection gaps in retirement savings. The first is the extent to which the regulatory framework establishes the appropriate savings and retirement income vehicles for individuals to adequately save for their retirement. This relates to the rules of the pension system that affect its capacity to deliver adequate retirement outcomes for the population. The second factor is the extent to which providers offer the savings and retirement income vehicles established in the regulatory framework for the population to use. This relates to the availability of appropriate savings instruments and vehicles. A final factor relates to the extent to which the population makes use of the available savings and retirement income vehicles to adequately prepare for their retirement. This relates to the population’s uptake and use of the instruments at their disposal to save for retirement.
This chapter analyses financial protection gaps in retirement savings by looking at the experience of several Asian countries.1 It first looks at financial protection gaps arising from the rules of the pension system, from the availability of savings and retirement income vehicles, and from the population’s use of the available vehicles. It then discusses the main drivers of the financial protection gaps and provides policy options to addressing these gaps, using lessons learnt from those countries and OECD experiences. The analysis considers the direct measures of financial protection gaps, looking at the extent to which individuals have access to and contribute to savings and retirement income vehicles. It also considers broader challenges that may have an impact on the retirement income individuals receive, which is ultimately the measure of interest to assess financial protection gaps in retirement savings. Such additional challenges include issues related to investments, early access to savings or financial sustainability.
The analysis shows that financial protection gaps in retirement savings mainly originate from the fact that many individuals fail to participate in pension and retirement savings schemes, and when they do, the benefits they can expect to receive may be insufficient or may not cover them for their entire lifetime in retirement.
The capacity of the pension system to deliver adequate retirement outcomes depends on the rules of the system. The rules dictate to what extent individuals have access to pension and retirement savings schemes, how much they can contribute, how they can invest their savings, how they can access their savings, and how much they can expect as retirement income.
2.1.1. Coverage of pension and retirement savings schemes
Employees in the formal sector are usually covered by a mandatory pension scheme. Table 2.1 presents the types of pension schemes that different categories of workers have access to. In the seven countries analysed in this report (Indonesia, Malaysia, Pakistan, the Philippines, Sri Lanka, Thailand, Viet Nam), public-sector employees are mandatorily covered by a DB scheme, either tax financed or pay-as-you-go (PAYG). Malaysia and Sri Lanka distinguish between pensionable and non-pensionable public-sector employees, with a defined benefit (DB) scheme for the former and an asset-backed defined contribution (DC) scheme for the latter. Formal private-sector employees are usually covered by a mandatory contributory pension scheme, either PAYG DB or asset-backed DC. Indonesia, Pakistan, the Philippines and Sri Lanka also have mandatory DB severance systems for formal private-sector employees. Viet Nam is the only country with an integrated mandatory system for public and private-sector workers.
Notes: M = mandatory; V = voluntary.
1. Employees contribute but benefits are financed by the government budget.
2a. Mandatory for employees of medium-sized and large enterprises. 2b. Mandatory for employees of small-sized, medium and large enterprises, and voluntary for employees of micro enterprises.
3. Only for permanent workers.
4. Including employees in micro-sized enterprises.
5a. Only for pensionable public-sector employees. 5b. For non-pensionable public-sector employees.
6. Some provinces are transitioning from tax-financed DB to asset-backed DC for civil servants.
7. Only for employees in companies with at least 10 employees. Employees working in financial institutions are not covered.
8. Only for employees in companies with at least 10 or 20 employees depending on the province. Employers can choose to set up a provident fund or a gratuity fund.
9. The asset-backed DC component only covers workers earning more than PHP 20 000 per month. Members also have access to a voluntary DC pension fund within the SSS.
10. Not mandatory for companies in the retail, services and agriculture sectors, as well as for employers with up to 10 employees.
11. Only for public-sector employees not in the government schemes (PSPS or PSPF).
12. Mandatory for those who joined the public service from 1997 and voluntary for the others.
13. Only for workers who have previously contributed to the mandatory scheme for private-sector employees.
14. Mandatory for business managers and owners of registered household businesses as of July 2025, and voluntary for farmers and informal sector workers.
In some countries, company size and type of sector influence the extent to which mandatory pension schemes cover formal private-sector employees. Among formal employees in Indonesia, 83% are working in large or medium enterprises,2 4% in small enterprises and 14% in micro enterprises. Only those working in large or medium-sized enterprises have access to the mandatory asset-backed DB scheme (BPJS – JP). In Pakistan, only private-sector workers in companies with at least 10 employees participate in the mandatory PAYG DB scheme (EOBI). This excludes 45% of persons employed in the informal sector and 38% of persons employed in the agricultural sector.3 In the Philippines, private-sector employers with up to 10 employees and those in the retail, services and agriculture sectors are exempted from the obligation to provide a retirement severance scheme to their employees. More than 80% of employees in the Philippines work in those exempted sectors.4 In Sri Lanka, only employees in companies with at least 15 employees may be eligible to gratuity.
Self-employed and informal workers represent a significant share of total workers, and they usually only have access to voluntary pension schemes. The share of self-employed and informal workers in total employment varies from 25% in Malaysia, to 33% in the Philippines, 41% in Sri Lanka, 44% in Viet Nam, 45% in Pakistan, 50% in Thailand and 59% in Indonesia.5 The Philippines is the only country where these workers are mandatorily covered by the same pension scheme as private-sector employees (SSS). In Viet Nam, business managers and owners of registered household businesses are also covered by the same pension scheme as employees (VSS) as of July 2025. In the other countries, self-employed and informal workers only have access to voluntary pension schemes. In Indonesia and Malaysia, the self-employed can contribute on a voluntary basis to the mandatory asset-backed DC scheme covering private-sector employees (the BPJS – JHT and the EPF, respectively), though in Indonesia they are limited to the employee-portion of the mandatory contributions for formal workers. Sri Lanka has a voluntary asset-backed DB scheme (SSB) targeting the self-employed. In Thailand, workers who have contributed to the mandatory PAYG DB scheme (SSF Article 33) as formal private-sector employees are eligible to participate in a similar scheme (SSF Article 39) once they become self-employed or informal. Two other pension schemes target informal workers (SSF Article 40 and NSF).
All countries have voluntary personal pension plans, but occupational pension plans are not available everywhere. Voluntary personal pension plans are usually available to all workers.6 By contrast, voluntary occupational pension plans are only accessible to the employees of the employers sponsoring the plans. Voluntary occupational pension plans are available in all countries except Malaysia. In Indonesia and the Philippines, these plans may be DB or DC and can be used to fully or partially offset employers’ obligations under the DB severance scheme.7 8
Additionally, citizens working abroad sometimes have access to pension schemes. In the Philippines, these workers are mandatorily covered by the same pension scheme as private-sector workers (SSS). Pakistan and Sri Lanka have dedicated voluntary pension schemes for workers abroad (within the VPS and SSB, respectively). Some countries also have special pension schemes for the armed forces and military personnel, such as Indonesia, Malaysia and the Philippines. These special arrangements are not covered further in this chapter.
Finally, safety net pensions are available for older people without access to other sources of income. Table 2.2 shows that, depending on the country, the programmes may target people over the age of 60 (Malaysia, the Philippines, Thailand) or those over the age of 70 (Indonesia, Sri Lanka and Viet Nam). All the programmes are means-tested to target only the elderly with no or low resources.
Significant portions of the population are out of the labour force, in particular among women, making them reliant on safety net programmes. Figure 2.1 shows that the labour force participation rate of women varies from 21% to 63% across the Asian countries covered, while it stands at 67% in the OECD area. Moreover, labour force participation rates are much larger for men. This implies that women are less likely to be covered by the pension system and to build their own pension entitlements, leaving them with only safety net pensions. In some countries, individuals outside the labour force have access to voluntary pension schemes, however. For example, in Malaysia, any individual outside the labour force can voluntarily participate in the mandatory scheme for private-sector employees (EPF). In addition, male members of the EPF can divert two percentage points of their own mandatory contributions to their wife’s account, as long as their wife is also an EPF member. In the Philippines, non-working spouses of members of the mandatory pension scheme for private-sector employees (SSS) can voluntarily participate in the scheme. In Sri Lanka, parents can enrol their children aged under 18 in a pension scheme (SSB).
As a percentage of the population aged 15 and over
Note: 1. Ratio as a percentage of the population aged 10 and over.
Source: Labour Force Surveys and OECD Labour force participation rate database.
2.1.2. Contribution rules
Mandatory contribution rates vary across countries and categories of workers. Figure 2.2 shows that mandatory contribution rates are set at 20% of earnings or more for some categories of workers in Malaysia (24% for private-sector employees), Pakistan (22% for civil servants in the Khyber Pakhtunkhwa or KPK province), the Philippines (21% for private-sector employees), Sri Lanka (23% for private-sector employees) and Viet Nam (22% for public and private-sector employees). By contrast, mandatory contribution rates are below 10% in Indonesia and Thailand for both public and private-sector employees, as well as in Pakistan for private-sector employees. In Pakistan, the Philippines and Thailand, contribution rates are higher for public than for private-sector employees, while it is the other way around in Indonesia, Malaysia and Sri Lanka. Contributions are usually shared between employers and employees, except in Indonesia (only public-sector employees contribute to their mandatory pension schemes, Taspen) and Malaysia (only the government contributes to the mandatory pension scheme for public-sector employees, JPA). By way of comparison, mandatory contribution rates average 20% of earnings across OECD countries for private-sector employees, with 41% paid by employees on average. In the Philippines, the self-employed must contribute by themselves as much as in the case of private-sector employees (15% in the SSS), but they declare the income on which contributions are calculated and tend to set it at the minimum (PHP 5 000 per month in 2025).9 In Viet Nam too, the self-employed mandatorily covered by the pension scheme for employees must pay the full contribution by themselves (22% in the VSS).
As a percentage of earnings
Notes:
1. The contribution rate of 24% shown for private-sector employees (11% paid by employees and 13% paid by employers) applies to Malaysians and permanent resident workers under the age of 60 and earning up to MYR 5 000 per month. An employer contribution rate of 12% instead of 13% applies for those earning more than MYR 5 000 per month. For permanent resident workers aged 60 and above, all contribution rates are halved. For Malaysians aged 60 and above, a 4% contribution rate applies and is fully paid by the employer.
2. Data for public-sector employees refer to the Khyber Pakhtunkhwa (KPK) province.
3. For private-sector employees, the 6.35% contribution rate is jointly paid by the employer, the employee and the government.
Mandatory contributions may apply on a portion of earnings when earnings subjected to mandatory contributions are capped. In Indonesia, contributions to the mandatory asset-backed DB scheme for private-sector employees (BPJS – JP) are calculated on earnings up to IDR 10 547 000 per month (3.3 times the average wage). In Pakistan, contributions to the mandatory pension scheme for private-sector employees (EOBI) are calculated based on the minimum wage. In the Philippines, contributions to the mandatory pension scheme for private-sector workers (SSS) are calculated on earnings up to PHP 20 000 per month (1.1 time the average wage) for the PAYG DB component and on earnings between PHP 20 000 and PHP 35 000 per month (1.9 time the average wage) for the asset-backed DC component. At the end of 2023, around one-third of active SSS members had earnings above the first threshold and were contributing to the DC fund. In Viet Nam, the cap on earnings corresponds to 20 times the reference level or VND 46.8 million per month as of July 2024 (6.2 times the average wage).
Voluntary contributions may be associated with minimum and maximum limits. Such limits may be expressed as a percentage of income or as a fixed amount. For example, in Sri Lanka and Thailand, public-sector employees can top up their contributions to the mandatory asset-backed DC scheme by up to 6% of salary in Sri Lanka (PSPF) and between 1% and 27% of salary in Thailand (GPF). In Thailand, employee contributions to voluntary occupational DC schemes can be between 2% and 15% of salary and the same range applies to employer contributions. In countries expressing the maximum limit as a fixed amount, that amount ranges from a few percentage points of the national average wage (e.g. THB 300 per month or 2% of the average wage in Thailand for informal workers contributing to the SSF Article 40) to several multiples of the national average wage (e.g. PHP 400 000 per year or 181% of the average wage in the Philippines for workers abroad contributing to a PERA). When contribution floors are set as a fixed amount, this amount represents no more than 0.2% of the national average wage.
While contributions to voluntary occupational pension schemes must be paid monthly, more flexibility is granted to contributions to voluntary personal pension schemes in some countries. For example, in the Philippines, individuals contributing to a PERA can choose how often to pay contributions. Another approach is to require plan members to contribute very little every month. For example, in Sri Lanka, the contribution amount to the Surekuma scheme (SSB) for the self-employed varies with the age when the member joins the plan (the earlier they join, the lower the contribution) and members can select among several payment schedules ranging from single lump-sum contributions to annual contributions.
Several countries encourage voluntary retirement savings through tax incentives. For example, in Thailand, retirement savings in voluntary pension schemes are not taxed at all, as contributions are deductible from taxable income, investment income is tax exempt and pension benefits are tax exempt. In Indonesia, contributions and investment income are also tax free for occupational and personal pension schemes, but pension benefits are only tax exempt if taken as a lump sum worth less than IDR 50 million.10 In the Philippines, for voluntary personal plans (PERA), investment income and pension benefits are tax exempt, and contributions enjoy a 5% non-refundable tax credit. However, workers abroad may not be able to fully benefit from the tax credit, as their main income source is not taxable in the Philippines and the tax credit can only be used to reduce taxes payable to the Philippines’ government (e.g. personal income tax, documentary stamp tax, donor’s tax, capital gains tax).11 In Pakistan, contributions to voluntary personal pension plans (VPS) enjoy a tax credit equivalent to the tax paid on those contributions, investment income is tax exempt and 50% of the accumulated assets can be taken as a tax-free lump sum, with the rest being taxed at the average tax rate over the past three years.12 The tax treatments described above tend to be more generous than the most common one applying in OECD countries, where contributions are tax deductible, investment income is tax exempt and pension benefits are taxable (OECD, 2024[1]).
Another approach used in some countries to encourage voluntary retirement savings is through state matching contributions. Tax deductions and non-refundable tax credits on contributions only provide an incentive to individuals paying personal income tax. However, many individuals may not pay personal income tax.13 Alternatively, state matching contributions are valuable irrespective of the tax status of the individual. In Malaysia, members of the mandatory asset-backed DC scheme for private-sector employees (EPF) who are self-employed workers or female registered in the National Poverty Data Bank are eligible for state matching contributions (20% and 50%, respectively, subject to an annual and lifetime cap) if they make voluntary contributions. Thailand has two pension schemes targeting informal workers and encouraging voluntary contributions through state matching contributions. In the national savings fund (NSF), the match rate increases with age, from 50% for members aged 15 to 30, to 80% for those aged 31 to 50 and to 100% for those aged 51 to 60. For the SSF Article 40, benefits may include old-age support depending on the option selected by the members. For options that include old-age benefits, the state provides a matching contribution of either THB 50 or THB 150 per month (effectively a 50% match rate).14 Ten OECD countries also use state matching contributions to encourage retirement savings (OECD, 2024[2]).
2.1.3. Investment rules
Investment rules may lead to significant concentration risk and low investment performance over the long term as they tend to favour secured assets for the investment of retirement savings and public pension reserves. For example, in Indonesia, voluntary pension funds (DPPK and DPLK) must invest a minimum of 30% in Indonesian government bonds. In Malaysia, the mandatory asset-backed DC scheme for private-sector employees (EPF) is required to invest or re-invest at least 50% of funds into domestic government bonds, subject to a minimum of 70% of total assets invested in such assets, according to the EPF Act 1991.15 In the Philippines, the asset-backed DC scheme and the reserves of the PAYG DB scheme for private-sector workers (SSS) must have at least 15% of their assets in domestic government bonds, while listed equities cannot exceed 40% of the assets of the DB reserves and 20% of the assets of the DC scheme. In Sri Lanka, the mandatory asset-backed DC scheme for public and private-sector workers (ETF) should maintain an asset allocation of minimum 94% in fixed income securities and maximum 6% in equities. In Thailand, at least 60% of the assets of the reserve fund of the PAYG DB schemes for private-sector workers (SSF Article 33 and Article 39) must be invested in highly secured assets, i.e. cash and deposits, government bonds and corporate bonds guaranteed by the state or with investment grade, while foreign investment cannot exceed 47% of total assets. Similarly, the reserves for the tax-financed DB scheme for public-sector employees (CSP) can only be invested in cash and deposits, government bonds and debt instruments issued by the Thai Ministry of Finance or state enterprises. In Viet Nam, voluntary pension funds must invest at least 50% of their portfolios in domestic government bonds. By contrast, no OECD country imposes an investment floor in domestic government bonds for pension funds (OECD, 2024[3]).
Plan members have limited investment choice in mandatory asset-backed DC schemes. There is no investment choice in Indonesia (Taspen – THT and BPJS – JHT), Pakistan (provident funds and employer pension funds), the Philippines (SSS) and Sri Lanka (EPF, ETF and PSPF). This could be linked to the fact that guarantees apply in some of these countries. Indeed, there is a 2.5% annual return guarantee in Sri Lanka. In Indonesia, the minimum guaranteed return is equal to the average interest rate of the 1-year counter rate of government bank deposit. In the Philippines, there is a capital guarantee at the time of retirement. By contrast, plan members have investment choice in Malaysia and Thailand. In Malaysia, members of the EPF can choose between a conventional fund and a sharia fund. The conventional fund is the default option and benefits from a 2.5% annual return guarantee. Moreover, EPF members who have saved above a certain threshold can transfer 30% of their excess savings to the i-Invest platform and choose their own investments from an approved list. In Thailand, public-sector employees who are members of the GPF can choose among several investment options.
Within occupational DC pension plans, employers may not always offer investment choice to participating employees. For example, in Thailand, a fund committee composed of employee and employer representatives approves all the parameters of the occupational pension plan (PVD), including whether to provide investment choice to members and, if so, the default investment strategy. Given the general low risk tolerance of Thai people and low levels of financial knowledge among fund committee members, most fund committees select a conservative strategy for all members or for the default option. At the end of 2022, 57% of employers provided occupational plans with investment choice for members and 4% of them offered a life-cycle investment option (ThaiPVD, 2022[4]).
By contrast, investment choice is usually provided in voluntary personal pension schemes. There are some exceptions. For example, in the Philippines, the voluntary pension scheme for the members of the SSS does not provide investment choice. In Thailand, members of the voluntary personal pension plans for informal workers do not have investment choice (NSF and SSF Article 40).
Some countries regulate the type of investment options offered to members of DC pension schemes. Table 2.3 shows that this is the case in Indonesia, Malaysia, Pakistan and the Philippines. In Malaysia, Pakistan and Thailand, the default option is a life-cycle investment strategy, although in Pakistan pension fund managers are not obliged to offer this type of investment option and may therefore select another default. Life-cycle investment strategies are also the preferred default option in the OECD (OECD, 2020[5]).
Note: 1. The allocations represent different combinations of investment in minimum three mandatory sub-funds (equity, debt and money market).
2.1.4. Early access to retirement savings
Members of asset-backed DC schemes can usually withdraw their savings before the normal age of retirement, although some conditions and penalties may apply. Table 2.4 presents the conditions to access DC retirement savings before the normal age of retirement. Malaysia and the Philippines are the only two countries where at least part of the mandatory retirement savings cannot be accessed before retirement age.16 In Indonesia, Pakistan, Sri Lanka and Thailand, plan members changing or losing jobs may be able to withdraw their savings, even from mandatory schemes in the first three countries. In most countries, plan members reaching a certain age (below the normal age of retirement), a minimum length of membership or with a minimum number of years of contributions can also withdraw their savings. Access to retirement savings may also be granted when plan members fulfil certain conditions (e.g. total and permanent disability, leaving the country, getting married) or when they need money to cover specific expenses (e.g. health, housing, education). Retirement savings may also be available at any time from voluntary schemes, although tax penalties apply. For example, in the Philippines, withdrawing PERA contributions without complying with the minimum age (55 years old) and contribution duration (5 years) leads to the repayment to the tax authority of all the tax incentives provided to the individual, i.e. the tax credit on his/her contributions, the tax exemption of employer contributions, and the tax exemption of investment income.
Note: Mandatory pension schemes are in blue and voluntary pension schemes are in orange.
Some countries allow plan members to take loans from their mandatory pension schemes. This is the case in the Philippines and Sri Lanka. In the Philippines, public and private-sector workers can take loans from their respective mandatory pension schemes (GSIS and SSS). For public-sector employees, the interest rate on the loan varies from 6% to 10% depending on the type of loan, while for private-sector workers, a fixed interest rate of 10% applies. In case of a default on a loan, deductions are made from the pension benefit payments received at retirement. In Sri Lanka, private-sector employees who are active members of the EPF can use 75% of their account as collateral for a housing loan. If members fail to pay the due instalments, the outstanding obligation (unpaid instalments plus a surcharge interest) is deducted from the account balance. Only few OECD countries allow plan members to take loans from their pension plan (e.g. Canada, Poland, the United States) (OECD, 2019[6]).
2.1.5. Expected pension benefits
The formulas to calculate pension benefits in mandatory DB pension schemes tend to be more generous to public-sector employees than to private-sector employees. Table 2.5 shows that, in Indonesia, Pakistan, the Philippines and Thailand, public and private-sector employees are covered by different DB pension schemes and the accrual rate is always higher for the former. Moreover, the formula uses the final salary for public-sector employees in Indonesia and Malaysia, and in Thailand for those hired prior to 1997. For private-sector employees, the formula usually uses an average salary over a period ranging from five years in Thailand and the Philippines, to the full career in Indonesia. In Viet Nam, women benefit from a higher accrual rate than men for the initial years of participation as they are entitled to a monthly pension equal to 45% of their average salary with 15 years of participation (3% yearly accrual rate), while men need to contribute for 20 years to reach the same benefit level (2.25% yearly accrual rate).17
Notes: “..” means not available. This table includes all mandatory DB pension schemes, irrespective of the financing method (PAYG, tax-financed or asset-backed).
1. The number of years considered for the average salary, the minimum number of years of service and the minimum benefit vary across provinces.
2. For public-sector employees who joined the public service before January 2025, the average salary is calculated on the past 5 to 20 years depending on when they joined, instead of the full career.
Ceilings on pension benefits may become increasingly restrictive. Some countries have a ceiling on the benefits that DB schemes pay, either through a maximum benefit level in nominal terms (e.g. BPJS in Indonesia, EOBI in Pakistan) or through a cap on the earnings used in the formula (e.g. SSS in the Philippines, SSF in Thailand, VSS in Viet Nam) (Table 2.5). This reduces expected replacement rates for higher-income earners. Moreover, these ceilings may not be indexed to wage growth. For example, the earnings cap of THB 15 000 per month in Thailand has been fixed at this level since 1999. In the Philippines, the PHP 20 000 earnings cap has not been adjusted at least since 2019. This means that the cap becomes restrictive for a growing proportion of members over time. Similarly, in Indonesia, while the maximum benefit level is indexed to prices, it could become restrictive if wages grow faster than prices. In Viet Nam, the reference level used to cap earnings is adjusted in line with inflation and economic growth, considering the state budget’s capacity and the financial position of the social insurance fund.
Mandatory DB pension schemes usually require a vesting period, so workers usually need to contribute for a minimum number of years to get a pension benefit at retirement. The minimum service period requirement to get a pension varies from 10 to 25 years across countries and types of schemes (Table 2.5). In the Philippines and Thailand, public-sector employees must participate for longer in their scheme than private-sector employees to be entitled to pension benefits. In Pakistan, the Philippines (GSIS) and Thailand (CSP), there is a lower threshold to get entitled to a lump sum instead of a pension. In Indonesia (BPJS – JP), the Philippines (SSS), Thailand (SSF) and Viet Nam (VSS), individuals not fulfilling the minimum service period receive a lump sum.
The retirement age currently varies across countries between 50 and 61 years old, depending on the type of pension scheme. Generally, different retirement ages apply to different types of pension schemes, except in Malaysia where a single retirement age of 60 applies (Table 2.6). In Indonesia, retirement ages are higher for DB schemes than for DC schemes (currently 59 versus 56). The retirement age is lower for voluntary pension schemes than for mandatory ones in Indonesia and the Philippines. In general, the same retirement age applies to public and private-sector employees in their respective mandatory scheme, except in Thailand, where public-sector employees have a higher retirement age (60 versus 55). Pakistan, Sri Lanka and Viet Nam have a lower retirement age for females than for males at least in some of the pension schemes. In Indonesia, the retirement age in the mandatory DB schemes for public and private-sector employees is increasing gradually from 56 in 2015 to 65 by 2043. In Viet Nam, the retirement ages in the mandatory DB scheme for public and private-sector employees have been increasing since January 2021 by 3 months per year for men to reach 62 in 2028, and by 4 months per year for women to reach 60 in 2035.
Notes: “VO” = voluntary occupational scheme; “VP” = voluntary personal scheme; “MDC” = mandatory DC scheme; “MDB” = mandatory DB scheme; “VDC” = voluntary DC scheme; “VDB” = voluntary DB scheme.
1. Increasing gradually every three years until reaching 65 by 2043.
2. The retirement age is 60 for pensionable civil servants appointed since 2012. They may opt for early retirement at the earliest at 55. For private-sector employees, the retirement age is also 60 but members of the mandatory pension scheme (EPF) can withdraw their savings from age 55. Contributions made after age 55 are locked in until age 60.
3. Increasing gradually to 60 by 2035.
4. Increasing gradually to 62 by 2028.
Members of mandatory DB schemes may be entitled to a lifelong pension at retirement, protecting them from the risk of longevity. In the seven countries, workers fulfilling the conditions regarding the contribution period and the retirement age are entitled to a lifelong pension from mandatory DB pension schemes. They also get a lump sum in addition to their lifelong pension in the Philippines (for public-sector employees), Sri Lanka (for public-sector employees) and Viet Nam (with more than 35 or 30 years of participation for men and women, respectively). In Pakistan (for public-sector employees) and the Philippines (for private-sector workers), workers can substitute part of their pension for a lump sum. Workers not fulfilling the minimum contribution period are usually entitled to a lump sum at retirement. However, they may not receive any benefit such as in the Philippines and Thailand, where public-sector employees should have at least 3 and 10 years of service, respectively, to get a lump sum (Table 2.5), or in Malaysia where benefits are forfeited if resigning before the age of 40 with less than 10 years of public service.
Members of mandatory asset-backed DC schemes are not protected against longevity risk. In most cases, workers are only entitled to a lump sum at retirement. Monthly instalments are also available in Malaysia (in the EPF) and the Philippines (over fixed periods of 5, 10 or 15 years in the SSS). Occupational and personal voluntary pension schemes tend to offer a range of options at retirement, including lump sums, drawdowns and annuities. In Indonesia, the payment of pension benefits from occupational pension plans must be made periodically over at least 10 years through drawdowns or annuities, and only 20% can be taken as a lump sum.18 Similarly, in Viet Nam, monthly payments from voluntary supplementary pension plans must last at least 10 years.
Similarly, severance DB schemes only pay a lump sum at retirement. These schemes exist in Indonesia, Pakistan, the Philippines and Sri Lanka. Benefits are proportional to the number of years of service with the employer.19 In the Philippines, employees need at least five years of service with the employer from whom they retire to receive a retirement severance payment. Similarly, in Indonesia, only the years of service with the employer from whom they retire count for the calculation of the benefits. In Pakistan, employees need at least six months of service to be entitled to severance benefits, which they receive whenever they leave their employer. In Sri Lanka, employees who have completed a minimum 5 years of continuous service with the same employer receive their gratuity payment within 30 days of the termination of their service.
Lack of portability between different pension schemes may impede the ability of workers switching jobs to accrue pension rights for their full career. For example, in Thailand, employees moving between public and private-sector employment accumulate pension rights under the civil service pension and the SSF Article 33 separately. Because of this separation, they may fail to fulfil the required minimum contribution period under each scheme to receive lifetime pension benefits. In Indonesia and the Philippines, the severance retirement pay is fully paid by the last employer and calculated based on the number of years of service with that employer only. In the Philippines and Sri Lanka, entitlement to severance benefits also requires a minimum of five years of service with the employer. This disadvantages mobile private-sector workers.
The length of time in retirement is longer for women than for men, which may lead to lower pension benefits from asset-backed DC schemes. Women’s longer average life expectancy means that, for a given age of retirement, they will spend more time in retirement than men and their assets will need to finance a longer period (Figure 2.3). According to 2024 data, women are expected to spend between 2.5 and 5.2 more years in retirement than men. Additionally, differences in time spent in retirement are even greater when women can retire earlier than men. For example, in Sri Lanka, private-sector employees can get a lump sum from the mandatory asset-backed DC scheme (EPF) from age 50 for women and 55 for men. This implies that women have lower contribution periods leading to lower lump sums, which need to finance a longer retirement period of 33 years for women, as opposed to 24 years for men.
In years
Note: Average life expectancy at different ages.
Source: United Nation’s World Population Prospects 2024.
The replacement rates that private-sector employees entering the labour force in 2022 may expect to get after a full career vary across countries, genders and earnings levels. Figure 2.4 presents theoretical gross replacement rates from mandatory pension schemes for private-sector employees at three levels of earnings, for men and women (OECD, 2024[7]). Workers are assumed to contribute for a full career, defined as entering the labour market at age 22 and working until the normal age of retirement. As the normal age of retirement varies across countries, the length of the career also varies. For male average earners, gross replacement rates vary from 32% in Sri Lanka to 72% in the Philippines. They exceed the OECD average of 50.7% in Indonesia, the Philippines and Viet Nam.20 In Indonesia, Malaysia, Pakistan and Sri Lanka, gross replacement rates are lower for women than for men, with the largest differences observed in Pakistan and Sri Lanka, where women can retire five years earlier than men. By contrast, in Viet Nam, women get a slightly higher gross replacement rate than men as their higher accrual rate during the initial years of participation more than compensates for their earlier retirement age (Table 2.5). Moreover, gross replacement rates decline significantly with earnings in Pakistan and Thailand. In Pakistan, this is because pension benefits are calculated based on the minimum wage instead of the actual wage earned by employees. In Thailand, the earnings cap in the benefit formula affects higher-income earners the most (Table 2.5).
As a percentage of gross pre-retirement earnings
Note: 0.5 = half average earnings; 1 = average earnings; 2 = twice average earnings; OECD = OECD average.
Source: OECD (2024[7]), Pensions at a Glance Asia/Pacific 2024, OECD Publishing, Paris, https://doi.org/10.1787/d4146d12-en.
Replacement rates are likely to be higher for public-sector employees. Although theoretical gross replacement rates are not available for public-sector employees, the rules described earlier related to benefit formulas for DB pension schemes show that public-sector employees would receive higher pensions than private-sector employees after a full career in Indonesia, Pakistan, the Philippines and Thailand (Table 2.5). Besides, in Malaysia and Sri Lanka, public-sector employees are covered by a DB pension scheme that would provide a maximum gross replacement rate of 60% and 90%, respectively (Table 2.5). This is more than what the asset-backed DC scheme delivers for private-sector workers (Figure 2.4).
However, several countries are facing financial sustainability issues for tax-financed and PAYG DB pension schemes that may lead to an adjustment of the plan parameters, such as higher contribution rates, lower benefits and/or higher retirement ages. Several countries have accumulated public reserves for DB pension schemes. At the end of 2023, pension reserves represented 2% of GDP in Indonesia (Taspen – JP and BPJS – JP), 9% in Malaysia (JPA), 1% in Pakistan (EOBI), 10% in the Philippines (GSIS and SSS) and 11% in Thailand (SSF). However, given population ageing, relatively low contribution rates compared to benefits paid and low retirement ages, these reserves are expected to be depleted relatively soon. For example, in Indonesia, the benefit payments of the DB scheme for private-sector employees (BPJS – JP) are expected to exceed contributions from 2051 and the reserves are expected to last only until 2074. In Pakistan, the reserves of the mandatory PAYG DB scheme for private-sector employees (EOBI) are expected to be depleted around 2038. In the Philippines, the reserves of the PAYG DB schemes for public and private-sector workers (GSIS and SSS) are expected to be depleted by 2054 and 2058, respectively. In Thailand, the reserves of the PAYG DB schemes for private-sector workers (SSF Article 33 and Article 39) are expected to be depleted by 2054 (SSO, 2017[8]). In Malaysia, payments from the reserve fund of the mandatory pension scheme for public-sector employees (JPA) have started since 2018. Moreover, in Pakistan, provinces are transitioning from tax-financed DB to asset-backed DC schemes for public-sector employees as the liabilities of the DB schemes are no longer sustainable.
Similarly, the solvency of asset-backed occupational DB plans may not be fully guaranteed, putting at risk the delivery of pensions. For example, in Indonesia, employers are required to finance any funding deficit in their DB plans, but the requirements around how the liabilities are measured are very flexible. Hence, some pension funds use discount rates above the average rate of return. This may underestimate the value of liabilities and provide a distorted view of the funding position of DB plans.
Once the regulatory framework authorises appropriate vehicles to save for retirement and finance retirement income, the availability of these vehicles is essential for individuals to be able to use them. Their availability depends on the extent to which employers participate in the pension system and offer voluntary occupational pension plans, as well as on the extent to which financial institutions enter the markets for voluntary personal pension plans and retirement income vehicles.
2.2.1. Employer participation
Some countries have problems with the compliance of employers with the rules of the pension system. For example, in Indonesia, large, medium, and small enterprises are required to register their employees in the mandatory asset-backed DC scheme (BPJS – JHT). However, enforcing companies to comply with this obligation is a challenge, especially for smaller ones. Hence, only around 38% of formal workers participate in a mandatory pension scheme (Taspen or BPJS). Similarly, compliance from small employers and self-employed workers is a challenge in the Philippines (SSS). At the end of 2024, self-employed and voluntary members represented 21% of all SSS members, even though self-employed and informal workers represent around one-third of total employment. In Pakistan, not all eligible companies are registered with the institution in charge of the PAYG DB scheme for private-sector employees (EOBI). In Viet Nam, the Vietnam Social Security submitted 417 files recommending prosecution against employers’ evasion of social insurance contributions to the investigation agency between 2018 and 2023.21 In 2023, around 67% of all enterprises and units in operation in Viet Nam participated in the mandatory pension scheme for employees and late and evading contributions amounted to VND 8 269 billion.
Employees in severance DB schemes financed through book reserves are at risk of not receiving their full benefits. In Indonesia, Pakistan and the Philippines, employers are not obliged to put money aside to finance the retirement severance benefits. Some employers may lack the resources to pay the benefits once they are due to retiring employees. Moreover, if the company goes bankrupt, employees may not receive any benefits. In Indonesia, less than 20% of employers are complying with their obligations to pay retirement severance to eligible employees, with mostly only large companies complying. Similarly, in the Philippines, there are many administrative cases of employees suing their employer for not having paid the retirement severance pay.
2.2.2. Provision of voluntary occupational pension plans
Employer provision of voluntary occupational pension plans tends to be low. For example, in Pakistan, the possibility for employers to offer occupational pension plans within the voluntary pension system (VPS) was only introduced in March 2024 and so far, no private-sector employer has offered such a plan. In the Philippines, only a few large employers offer occupational pension plans. In Thailand, less than 5% of employers are offering a provident fund (PVD) (ThaiPVD, 2022[4]). By contrast, in Indonesia, employers more commonly provide occupational pension plans to private-sector employees as these plans were introduced prior to mandatory pension schemes. This could be the case because employers offering occupational pension plans can use the assets from those plans to offset their severance liability on their balance sheet. However, since the introduction of the mandatory schemes for private-sector employees (BJPS – JP and JHT) in 2015, there has been a trend to close occupational pension plans. In 2015, 62% of companies provided an occupational pension plan (DPPK or DPLK), with 20% of these providing DB plans and 83% providing DC plans (Rosedewayani, 2017[9]). The number of DB pension funds has decreased from 164 in 2018 to 138 in 2023, and the number of DC pension funds has decreased from 44 to 36 (OJK, 2024[10]; OJK, 2022[11]). In 2022, 96 employer-provided occupational pension funds (DPPK) closed to new members.
2.2.3. Provision of voluntary personal pension plans
The provision of voluntary personal pension plans is concentrated in few providers. Table 2.7 shows the number of providers, the number of products they offer and the types of financial institutions that are allowed as providers. In the Philippines, there are only three administrators of PERA products, limiting the distribution of these products across the population. By contrast, Indonesia and Thailand have more than 20 providers of personal pension plans. There is usually a range of financial institutions that can apply for a license to provide personal pension plans.
2.2.4. Provision of retirement income vehicles
The provision of lifetime retirement income vehicles by pension providers and insurance companies is limited in most countries. For example, in Indonesia, life insurance companies generally do not offer products paying lifetime income. A recent legislation allowed them to offer fixed-term annuities. In Malaysia, only fixed-term annuities are available. In Pakistan, only one insurance company is an active pension fund manager in the voluntary pension system (VPS) and offers an annuity plan. In the Philippines, insurance companies have shown interest in entering the market of voluntary personal pensions (PERA) and offer life annuity products, but such products are not available yet. In Sri Lanka, fixed-term annuities up to 20 years are available in the market.
Even though individuals may have access to vehicles to save for and finance retirement income, they may not make use of available vehicles in a way that will lead to reaching their target retirement income. Individuals’ behaviour may affect their participation in the different pension schemes, the amounts contributed to those schemes, the way the savings are invested, the amounts withdrawn before retirement and the way savings are used to finance the payout phase.
2.3.1. Participation rates
Mandatory pension schemes are far from reaching universal coverage. Figure 2.5 shows participation rates based on total and active membership in mandatory (Panel A) and voluntary (Panel B) pension schemes. Membership data from different pension schemes are summed up within each country, so the participation rates are likely to be an over-estimation as some individuals may be members of several pension schemes. While more than 60% of the working-age population in Malaysia and the Philippines are members of a mandatory pension scheme, participation rates fall to less than 30% in Sri Lanka, Thailand and Viet Nam, and to around 10% in Indonesia and Pakistan. In comparison, between 60% and 96% of the working-age population participates in mandatory pension schemes for private-sector employees in a sample of OECD countries (OECD, 2024[7]).
As a percentage of the population aged 15 to 64
Notes: Data exclude members already drawing a pension. Data may include multiple counting as individuals may be members of several pension schemes, in particular for voluntary schemes. For Sri Lanka, data for the mandatory scheme for private-sector employees (EPF) refer to the number of active accounts, and total membership data are not available.
Source: OECD calculations based on national data sources on plan membership and working-age population.
Participation rates may be particularly low among women. The lower labour force participation of women (Figure 2.1) translates into a lower female representation in total membership. For example, in Indonesia (BPJS) and Pakistan (EOBI), women represent only 33% and 5% of all members, respectively, in the mandatory pension schemes for private-sector employees. By contrast, in Viet Nam, women represent about 55% of participants in the mandatory DB pension scheme (VSS).
Participation rates are even lower when considering active membership rather than total membership. Panel A of Figure 2.5 shows participation rates using both measures for Malaysia, Pakistan and the Philippines. In Malaysia, only around half of members of the mandatory pension scheme for private-sector employees (EPF) contribute to their plan at least once in any given year. In the Philippines, between 30% and 50% of members of the mandatory pension scheme for private-sector workers (SSS) pay contributions from month to month. In Pakistan, out of 11.3 million members in the mandatory pension scheme for private-sector employees (EOBI), 7.4 million actively contribute. Lack of compliance from employers and self-employed workers, spells of unemployment, and transitions between formal and informal employment explain those gaps between members and contributors. For example, in the Philippines, private-sector workers do not earn additional entitlements in the mandatory pension scheme (SSS) under the DB formula between 10 and 20 years of participation. This may incentivise some workers to become informal once they have reached 10 years of participation in the scheme.
The uptake of voluntary pension schemes is also relatively low. Less than 6% of the working-age population participate in voluntary pension schemes in most countries (Panel B of Figure 2.5). Across OECD countries, participation rates in voluntary occupational and personal pension plans range from 3% to 60% of the working-age population (OECD, 2024[12]). Thailand stands out with a participation rate of 31%. This number may include multiple counting as individuals can have several pension plans. Additionally, the SSF Article 40 for informal workers already has a participation rate of 16% just by itself. This is due to a government COVID-19 relief package introduced in 2021 that provided a cash handout of THB 5 000 per month to workers registered with the SSF.22 Many of these registered participants may not actively contribute.
Lack of awareness of the population and difficulties to claim tax incentives may explain the low uptake of voluntary pension schemes. Low levels of awareness of the population about voluntary pension schemes seem to be widespread across countries. Moreover, tax incentives may fail to encourage voluntary retirement savings in some countries. For example, for personal pension plans in Pakistan (VPS), employees can claim the tax credit on contributions through their employer subject to the filing of a tax return, while the self-employed need to undergo a complicated process for claiming tax benefits in their tax returns directly from the tax authority. As a result, self-employed workers only represent 7% of VPS members, even though these workers were one of the primary targets of the scheme. The process to claim the tax credit is similar in the Philippines for voluntary personal plans (PERA) and the self-employed only represent 15% of PERA members. In Viet Nam, amounts that can be deducted as voluntary pension contributions are different under the personal income tax system (VND 1 million per month) and the corporate income tax system (VND 3 million per month). As any contribution above VND 1 million is taxable for the individual, there is no incentive for them to contribute more than this amount, even though employers could contribute more as they have unused tax relief.
2.3.2. Level of voluntary contributions
Incomes vary significantly across different categories of workers, affecting their capacity to save for retirement. Women tend to earn less than men. For example, in Sri Lanka, the mean gross salary of female workers earning daily salaries was 56% of those of males in 2023 (LKR 17 527 for women and LKR 31 576 for men). Public-sector employees also tend to have higher earnings than private-sector employees. In Thailand, government employees had an average monthly wage of THB 21 000 in 2024, compared to THB 14 032 for private-sector employees. Moreover, there are also differences between formal employees, self-employed workers and informal workers. In Indonesia, the average monthly net income of regular employees was IDR 3 178 227 as of August 2023. The average net income of the self-employed was 63% that of regular employees, while the average net income of informal workers was less than 50% that of regular employees.
Individuals may contribute much less to their voluntary pension plans than the maximum allowed. There is little information about the level of contributions paid into voluntary pension schemes. In Malaysia, voluntary contributions to the mandatory pension scheme for private-sector employees (EPF) amounted to MYR 13.67 billion from 1.2 million contributors in 2024. This implies an average voluntary contribution of around MYR 11 400, much less than the annual limit of MYR 100 000. In the Philippines, a cumulative amount of PHP 491 million was paid into PERA accounts between December 2017 and December 2024. This translates into an average cumulative contribution of PHP 83 117 per member as of December 2024, or PHP 11 874 on average per member and per year.23 This is much lower than the PHP 200 000 annual limit. In Thailand, informal workers insured under the SSF Article 40 can choose among three options for their insurance coverage. Option 1 covers sickness, disability and death. Option 2 covers the same risks as option 1 plus pension. Option 3 covers the same risks as option 2 plus child-allowance. The contribution rate is fixed under each option and increases with the number of risks covered. In 2021, 87% of those building pension entitlements (i.e. contributing under option 2 or option 3) contributed the lowest amount possible (i.e. THB 100 per month under option 2). This, combined with low contribution density (ILO, 2022[13]), translates into a modest lump sum at retirement. In Malaysia, 103 000 men have diverted part of their mandatory contributions (two percentage points of the employee’s 11% contribution rate) to their spouse’s account (I-sayang programme of the EPF) as of December 2024.
2.3.3. Investment strategies
The amount of assets accumulated in asset-backed pension plans remains modest. Figure 2.6 compares total investment as a percentage of GDP in the seven countries under review to that in OECD countries (Panel A) and other selected Asian jurisdictions (Panel B).24 Except in Malaysia, where total investment in the mandatory pension scheme for private-sector employees (EPF) represented 62% of GDP at end-2023, total investment falls below 20% of GDP in the other countries. Pakistan, the Philippines and Viet Nam lag behind other selected jurisdictions in Asia, with total investment representing less than 0.5% of GDP at end-2023. One of the reasons for this low level of assets is that some of the asset-backed pension schemes have been introduced relatively recently in Indonesia (2015 for the BPJS), the Philippines (2021 for the mandatory DC component of the SSS), Pakistan (2005 for the VPS) and Viet Nam (2014 for voluntary supplementary pensions).
As a percentage of GDP
Note: Data for India refer to 2022.
Source: OECD Global Pension Statistics and national sources for Malaysia, Pakistan, the Philippines, Sri Lanka and Thailand.
Asset allocation strategies of asset-backed pension schemes tend to be conservative. Large allocations to bills and bonds are relatively common in Asia, as Panel B of Figure 2.7 shows. Within the bills and bonds allocation, domestic government bonds are predominant in Sri Lanka (more than 90% of total investment in the EPF and ETF schemes) and Indonesia (more than 65% of total investment in the BPJS schemes). Allocations to equities are relatively low compared to OECD countries, except in Malaysia, where the EPF invests 44% of its portfolio in equities (Panel A of Figure 2.7). Conservative investment strategies may lead to lower investment performance in the long term as countries become more developed and yields on domestic government bonds decline. Large allocations to domestic government bonds also create concentration risk as a default on those obligations would heavily affect the value of assets accumulated.
As a percentage of total investment
Notes: Data refer to end-2023 except for Malaysia, Pakistan and Thailand (end-2024). Data are not available for Viet Nam.
Source: OECD Global Pension Statistics and national sources for Malaysia, Pakistan, Sri Lanka and Thailand.
2.3.4. Early access to savings
Pension pots may be significantly reduced by the time individuals retire as they tend to use the different opportunities given to them to access their retirement savings before retirement. For example, in Indonesia, most of the assets in the DC component of the mandatory scheme for private-sector employees (BPJS – JHT) are withdrawn when members change or lose their job and only a small fraction of all claims is to members who have reached the age of retirement. Between 2016 and 2018, an average of 1.5 million people per month withdrew their savings from the scheme because they left their job. In Sri Lanka, since 2015, members of the mandatory pension scheme for private-sector employees (EPF) with at least 10 years of participation and LKR 300 000 in their account can withdraw 30% of their account balance for housing and medical expenses. A total of LKR 123.5 billion had been withdrawn by the end of 2022, with LKR 16.4 billion withdrawn by 27 278 members (about 1% of active members) in 2022 alone (EPF, 2023[14]). In Pakistan, around 10% of members of voluntary personal pension plans (VPS) withdraw funds before retirement on average each year (MUFAP, 2025[15]).
Individuals taking loans from their pension plans may fail to repay them in time and thereby receive a lower pension income. For example, in the Philippines, it is popular among members of the mandatory pension scheme for private-sector workers (SSS) to take loans as there is a strong borrowing culture in the country and the interest rate (10%) is usually lower than in the market. However, retiring members with outstanding debt must sometimes wait one or two years before receiving their full pension as deductions for loan repayment are taken from their pension income. In Sri Lanka, between 2013 and 2022, the mandatory pension scheme for private-sector employees (EPF) issued an average of 11 807 certificates of loan guarantees to the Department of Labour per year for the approval of housing loans amounting to LKR 5 690 million on average. However, around half of borrowers do not make their regular loan payments. On average, LKR 2 861 million was deducted from members’ accounts per year and remitted to the relevant lending institutions to settle overdue loans between 2013 and 2022.
2.3.5. Payout options
Plan members tend to withdraw their retirement savings as a full lump sum when given this option at retirement. For example, in Pakistan, around 60% of members of voluntary personal plans (VPS) withdrew cash upon retirement in 2024 instead of entering a drawdown plan (MUFAP, 2025[15]). In Thailand, among the members of voluntary occupational pension plans (PVD) who retired in 2022, 81% took a lump sum, 16% remained invested (drawdown) and 3% received an annuity (ThaiPVD, 2022[4]). In Malaysia, there is also a general preference for lump sums among the members of the mandatory pension scheme for private-sector employees (EPF), but the provision of free financial advice has been reducing the proportion of people taking their savings as a single lump sum over time.
This section first summarises the previous analysis by identifying the main drivers of the financial protection gaps in retirement savings using the experience of Indonesia, Malaysia, Pakistan, the Philippines, Sri Lanka, Thailand and Viet Nam. It then looks at approaches and policy options to addressing the gaps, distilling lessons learnt from those and other countries.
2.4.1. Drivers of financial protection gaps in retirement savings
Financial protection gaps in retirement savings mainly originate from the fact that many individuals fail to participate in pension and retirement savings schemes, and when they do, the benefits they can expect to receive may be insufficient or may not cover them for their entire lifetime in retirement.
Four main drivers explain why participation rates in mandatory pension schemes are below 60% of the working-age population in most countries (Figure 2.8). First, labour force participation rates are relatively low, especially among women, leaving a lot of individuals without access to mandatory pension schemes. Second, most mandatory pension schemes only cover formal employees. Informal and self-employed workers represent a large share of the employed population but are not covered by mandatory pension schemes, except in the Philippines. Third, certain private-sector employers are exempted from the obligation of registering their formal employees into mandatory pension schemes. Such exemptions tend to apply to smaller employers or to those operating in certain sectors (e.g. agriculture). Fourth, the level of compliance of employers and self-employed workers tends to be low.
Additional drivers explain the low uptake of voluntary pension schemes. This uptake is below 6% of the working-age population in most countries. First, voluntary occupational pension schemes are not available in Malaysia, while their provision by employers is low or declining in the other countries. Therefore, only a small proportion of employees have access to voluntary occupational pension plans. Second, the number of providers of personal pension plans is relatively small in some countries (e.g. the Philippines), potentially limiting the distribution of these plans to a wide range of the population. Third, the population generally lacks awareness of the need to save for retirement and of the different vehicles available to them. Fourth, tax incentives fail to encourage some individuals to participate in voluntary pension schemes, in particular those with low or no income-tax liability and those who need to go through complex processes to claim tax relief. Fifth, employers and individuals may not be willing to voluntarily save more as mandatory contributions are already perceived to be high. Therefore, even though individuals have access to personal pension plans, many do not open a plan to save for retirement.
Among individuals participating in pension and retirement savings schemes, the retirement income they can expect to receive from these schemes may be inadequate. The drivers differ for DC and DB plans.
Short contribution periods and early access to savings are the two main drivers of lower-than-expected DC pension benefits. Pension benefits from DC plans are affected by the amounts contributed, the length of the contribution period, the investment strategy, and the amounts withdrawn before retirement. Contribution rates to mandatory asset-backed DC schemes may be in line with their role in the provision of retirement income in the different countries. In Malaysia and Sri Lanka, mandatory asset-backed DC schemes are the main source of retirement income for private-sector employees and their contribution rates are relatively high, at 23% in Sri Lanka (EPF and ETF) and 24% in Malaysia (EPF).25 In the other countries, mandatory asset-backed DC schemes complement PAYG or tax-financed DB plans and contribution rates are therefore smaller. The length of the contribution period may not be long enough, however, to produce high enough pension benefits. Low retirement ages, currently between 50 and 61, reduce the length of the accumulation phase and imply that the accumulated assets need to finance a longer retirement period, in particular for women. As a result, expected gross replacement rates after a full career are lower than 40% in both Malaysia and Sri Lanka, despite contribution rates above 20% (Figure 2.4). The gross replacement rate even falls to 21% for women in Sri Lanka as they can retire 5 years earlier than men. Moreover, high levels of informality are likely to result in low contribution densities, as workers would stop contributing when switching from formal to informal employment. This would reduce expected benefits compared to a full career of contributions. Additionally, conservative investment strategies expose pension funds to concentration risk and may lead to lower performance in the long term as yields on domestic government bonds may decline as countries become more developed. Finally, pension assets may be significantly reduced by the time individuals retire as they tend to use the different opportunities given to them to access their retirement savings before retirement.
DB pension schemes may provide adequate retirement benefits, but several factors may undermine this. Indeed, with mandatory DB schemes providing yearly accrual rates at or above 2% in most countries, members can expect a replacement rate of minimum 60% after 30 years of service. However, benefit ceilings may significantly reduce expected benefits for higher-income earners. This is the case for example in Thailand for private-sector employees, where benefits are calculated based on capped earnings. Benefit ceilings will also affect an increasing share of plan members as they are usually not indexed to wage growth. In addition, the combination of high service period requirements and lack of portability between different pension schemes may reduce the proportion of members entitled to pension benefits. Indeed, a minimum of 10 to 25 years of service is required for members to become entitled to pension benefits. However, switching between formal and informal employment may reduce workers’ ability to fulfil this requirement. Even among formal employees, lack of portability of pension rights from one employer to the next (e.g. DB severance schemes) or between pension schemes for public and private-sector employees may result in lost benefits for mobile workers. Finally, the financing of DB pensions may not always be secured. Indeed, pension benefits are not always aligned with the contributions paid and the age of retirement, and this imbalance combined with population ageing may result in the depletion of public reserves in a relatively short time horizon. Moreover, some employers may fail to pay occupational pension benefits or severance benefits because they did not put enough money aside to finance such benefits.
Lastly, many retiring individuals may lack protection from longevity risk. Only individuals fulfilling the retirement age and minimum service requirements are entitled to lifelong pensions from mandatory PAYG or tax-financed DB pension schemes. DB severance schemes only pay lump sums, while mandatory asset-backed DC schemes may offer a choice between lump sums and monthly instalments. Members of voluntary occupational and personal pension plans may be able to choose life annuities as payout option, but the provision of lifetime retirement income vehicles by pension providers and insurance companies is limited in most countries. Additionally, individuals tend to prefer lump sums over life annuities. Without lifelong payout options, individuals may risk outliving their resources or may underuse their resources to avoid running out of money.
2.4.2. Policy options to addressing financial protection gaps in retirement savings
This section provides policy options to addressing financial protection gaps in retirement savings based on the drivers discussed above. The main policy recommendations are to increase participation rates in mandatory and voluntary pension schemes, ensure sufficient contribution levels and contribution periods, align investment strategies with the long-term horizon of retirement savings, improve the portability of pension entitlements, limit access to savings before retirement and design payout options in line with people’s needs in retirement.
Participation in mandatory pension schemes
Countries should increase the coverage of mandatory pension schemes to reduce the proportion of retirees relying on safety net programmes. The self-employed and private-sector employees working in small companies could be the first target to expand coverage. Existing exemptions may encourage some companies to use contractual workers instead of hiring employees or to remain below a certain size to avoid paying mandatory pension contributions, raising fairness issues regarding social protection (OECD, 2019[16]). The Philippines provides an example of a country with a mandatory pension scheme (SSS) covering all private-sector employees, domestic workers or household employees, self-employed workers and citizens working abroad. Viet Nam extended the coverage of its main pension scheme (VSS) to business managers and owners of registered household businesses, taking effect from 1 July 2025. Among OECD countries, the self-employed are covered by the same mandatory asset-backed pension scheme as employees in Colombia, Estonia, Iceland, Israel, Latvia and Sweden, for example (OECD, 2020[17]).
The tax authority could play a role in collecting mandatory pension contributions or enforcing compliance from the self-employed. Enforcing the payment of mandatory pension contributions from self-employed workers could be a challenge. If there is a reliable tax collection system, the tax authority could withhold mandatory contributions and channel them to pension funds, or identify workers and employers with delayed contribution payments. This would increase compliance. In Iceland for example, self-employed workers contribute to the mandatory occupational pension system once a year when they make their income declaration to the tax authority.26 The tax authority is responsible for checking that contributions are paid and chases individuals when they fail to comply. In Chile, the self-employed pay their social security contributions in April of each year using the taxes withheld on their invoices during the previous year. These contributions cover the individual for the period from July of the year of payment of contributions until June of the following year. In Israel, the self-employed must pay pension contributions at the latest by the end of the tax year. However, a self-employed worker has the choice of making monthly payments, a one-off payment or periodic payments. After the income declaration process, the tax authority checks whether the individual has deposited the appropriate funds into a pension plan. If not, the tax authority sends a notice with the amount that needs to be paid within a certain date.
More generally, ensuring that the authorities have access to the information regarding enrolment and contributions is essential to their ability to enforce compliance. The Ministry of Labour in Sri Lanka has made efforts in this regard and has an internal data management system, which can automatically calculate notices for unpaid contributions to the mandatory pension scheme for private-sector employees (EPF). They also manage an online complaints system for employees to report if their employer has not paid their contributions. Nevertheless, they currently maintain separate databases with the Central Bank, who manages the administration and investment activities of the EPF. Both are working to harmonise the two databases to facilitate data sharing and minimise errors.
Countries could also take stronger measures to enforce compliance. For example, in Malaysia, employers failing to comply with their different obligations with respect to the mandatory pension scheme for private-sector employees (EPF) are subject to various penalties depending on the offense, ranging from bankruptcy actions, to seizure of assets, retention of passports of the company’s directors, imprisonment and fines.27 In Sri Lanka, the Ministry of Labour can take legal actions against employer non-compliance with EPF obligations if employers do not heed an initial warning. They have 68 regional offices with employees carrying out on-site inspections in 20 establishments per month to check employer compliance. In Viet Nam, late payment and evasion of contributions to the mandatory pension scheme for public and private-sector employees (VSS) are subject to penalties. Employers must pay the full amount of overdue contributions plus a fine of 0.03% per day. Administrative fines and non-monetary penalties are also possible.
Fines and sanctions can work to enforce compliance, however building partnerships with key players could also help. For instance, the SSS in the Philippines is building partnerships with different institutions to expand the number of private-sector workers participating in the mandatory pension scheme. Examples of partnerships include with the Commission on Filipinos Overseas28 to reach contractual service workers, with the Cooperative Development Authority29 to reach members of cooperatives, with the Philippine Crop Insurance Corporation30 to reach farmers and fisherfolk, and with the Angkas motorcycle taxi company31 to reach platform workers. In Malaysia, the EPF has also engaged with various strategic partners to collaborate in helping members to save for retirement. These include the National Sports Council to reach athletes, the National Film Development Corporation Malaysia to reach workers in the creative industry and six platform providers to reach gig workers.
Ensuring incentives continue over time for workers to remain in formal employment and keep contributing to mandatory pension schemes may also increase compliance. In particular, the formula used in DB plans should avoid situations where additional years of contributions do not grant sufficient entitlements, as this may encourage workers to stop participating by switching from formal to informal employment. Adjusting the ceilings for earnings used in the DB formula in line with wage growth could help addressing the issue as it would avoid that pension rights lose relevance compared to workers’ earnings. Setting fixed accrual rates could also ensure that any additional year of contribution earns the same additional pension rights.
Participation in voluntary pension schemes
Voluntary pension schemes are important to complement mandatory pension schemes. They allow people to reach higher pension income without forcing workers who cannot afford to contribute more to do so.
Countries could increase the role of employers in the provision of voluntary pension schemes. Employees value jobs offering access to an occupational pension plan, and so employers can use pensions to attract and retain employees, thereby reducing hiring and training costs (OECD, 2022[18]). Countries willing to increase access to voluntary pension plans among employees could consider reducing the barriers that may prevent employers to be involved in pension provision (OECD, 2022[18]). For example, Indonesia allows employers to convert their occupational pension plans from DB to DC with the aim of reducing the number of plan closures by reducing the risks borne by employers. In the Philippines, employers can contribute to the voluntary personal pension plan (PERA) of their employees, thereby removing the administrative burden of setting up their own occupational pension plan. Another approach is to promote pension arrangements pooling multiple employers (OECD, 2024[19]).
Countries could also implement automatic enrolment to raise participation rates in voluntary pension plans. Automatic enrolment has gained popularity since the late 2000s in the OECD (OECD, 2019[20]). It involves signing people up automatically to a pension plan and giving them the possibility to opt out, so participation remains voluntary. The policy harnesses the power of inertia and procrastination to increase the number of individuals joining a plan. Automatic enrolment is currently available in 10 OECD countries.32 Depending on the country, workers are enrolled automatically by their employer or by the social security institute, and employers are not always obliged to contribute on behalf of employees staying in the plan. In New Zealand and the United Kingdom, all employers must enrol their eligible employees automatically into a pension plan and opt-out rates around 10% have resulted in significant increases in participation rates in voluntary pension plans (OECD, 2019[20]).
Additionally, countries could consider adjusting the design of their financial incentives. The OECD Recommendation for the Good Design of Defined Contribution Pension Plans recommends countries to “design financial incentives to maximise their impact on enrolment and contributions” (OECD, 2022[21]). Financial incentives provided through the tax system may not be the most appropriate when the goal is to encourage low-income earners to make voluntary pension contributions. Indeed, low-income earners may not have sufficient tax liability to fully enjoy tax deductions and tax credits, and they may not react to tax incentives due to a general lack of understanding of tax-related issues (OECD, 2018[22]). Non-tax financial incentives are better suited to target this population because they are not linked to the individual’s tax liability and are directly paid into the pension account (OECD, 2018[23]). There are two categories of non-tax financial incentives, matching contributions and fixed nominal subsidies. Matching contributions are usually expressed as a percentage of the saver’s own contribution, up to a limit. Fixed nominal subsidies are fixed payments and as such are more valuable to lower-income earners. Both types of incentives are only paid if the individual makes voluntary contributions. Among OECD countries, 10 provide state matching contributions and 7 provide state fixed nominal subsidies (OECD, 2024[2]). Malaysia and Thailand provide state matching contributions to encourage voluntary pension contributions in some of the schemes.
Education and communication efforts can also encourage individuals to contribute voluntarily to a pension plan by highlighting the importance of saving for the future and helping people to understand practically how they can go about contributing to a pension plan. To be effective, programmes should ideally be tailored to specific populations, in line with the OECD Recommendation on Financial Literacy (OECD, 2020[24]). There are several examples of successful communication and education efforts in OECD countries targeted at increasing the participation of women in pension plans, for example (OECD, 2021[25]). Sri Lanka has been successful at increasing participation in voluntary plans for the self-employed by employing individuals to specifically promote the plans and to enrol new members, with annual enrolees growing from 15 thousand per year to 50 thousand per year.
Contribution levels and duration
Countries may need to balance contribution rates, contribution periods and benefits to improve the financial sustainability of PAYG DB schemes. One approach is to increase contribution rates to mandatory pension schemes. For example, in Indonesia (BPJS – JP), Pakistan (EOBI) and Thailand (SSF Article 33), contributions are often insufficient to finance expected benefits from DB schemes, particularly in light of population ageing. Similarly, higher contribution rates to asset-backed DC schemes could increase expected benefits from these schemes (e.g. BPJS – JHT in Indonesia). Increases in mandatory contribution rates need to be gradual to allow contributors, employers and workers, to adjust to the change. For example, the contribution rate to the mandatory pension scheme for private-sector workers (SSS) in the Philippines increased gradually from 12% in 2019 to 15% in 2025, with the increase being shared between employers and employees. Nevertheless, any increase in mandatory contributions should be considered in light of individuals’ capacity to save and existing voluntary contributions.
Some countries may also consider transitioning from non-contributory tax-financed pension schemes to contributory asset-backed pension schemes. Tax-financed pension schemes for public-sector workers exist in several countries. They impose a growing burden on public finances given population ageing. For example, in Thailand, government expenditures for the civil service pension have already increased significantly over the past decade, from around 0.8% of GDP in 2008 to around 1.3% in 2019 (World Bank, 2023[26]). As population ageing continues, the financial burden is expected to keep increasing, to reach 1.8% of GDP by 2035 and 2.4% of GDP by 2060 (World Bank, 2019[27]). One possible option is to transform tax-financed pension schemes into asset-backed pension schemes, with contributions being shared between employers and employees. This is what the different provinces of Pakistan are currently doing for their public employees. The KPK province is the first province that did it and it introduced a DC scheme for all employees joining on or after 7 June 2022.
Countries should also consider increasing retirement ages to allow workers to accumulate higher pension rights and assets along their career, thereby receiving higher pension benefits. Normal retirement ages currently vary from 50 to 61 years old across countries. This translates into a retirement period ranging from 16 to 33 years given current mortality rates (Figure 2.3). As life expectancy increases, the length of the retirement period is also expected to increase, putting DB pension plans under financial strain and reducing expected benefits from DC pension plans. As stated in the OECD Recommendation for the Good Design of Defined Contribution Pension Plans, individuals should be encouraged to contribute for longer by starting early and postponing retirement, in particular when life expectancy increases (OECD, 2022[21]). Retirement ages should increase gradually, like in Indonesia and Viet Nam. Retirement ages should also be harmonised across different mandatory pension schemes to avoid that individuals retire at the earliest possible age.
Moreover, countries should harmonise retirement ages between men and women. Women already expect to spend a longer time in retirement than men when retiring at the same age. Letting women retire earlier than men can put them at a disadvantage as they have less time to accumulate pension entitlements and whatever they have accumulated needs to finance a longer period. Most OECD countries have the same retirement age for both genders (OECD, 2021[25]).
Investment
Countries could introduce some investment choice for plan members in asset-backed DC schemes. The OECD Recommendation for the Good Design of Defined Contribution Pension Plans recommends investment choice, as it allows individuals to align their investment strategy with their preferences, investment horizon and level of risk tolerance (OECD, 2022[21]). However, existing minimum return guarantees should not be extended to all newly offered investment strategies, as individuals could then opt for the riskiest option knowing that they would not have to suffer in case of extreme negative scenarios. Furthermore, investment choice may be best suited for those with more investment knowledge or sufficient savings. In Malaysia, members of the mandatory pension scheme for private-sector employees (EPF) are only allowed to choose their own investments once their assets exceed a certain specified threshold. In addition to having sufficient savings, participants in the Central Provident Fund in Singapore must complete a Self-Awareness Questionnaire to ensure that they are conscious of their own capacity to choose investments appropriately and of the potential risks involved.
Countries should properly design a default investment strategy when introducing investment choice. Not all individuals are willing or able to make investment decisions. For these individuals, a default option is necessary. The OECD Recommendation for the Good Design of Defined Contribution Pension Plans argues that life-cycle investment strategies can be well suited as default options as they allow individuals to take risk when young while mitigating the impact of extreme negative events on accumulated assets as they get closer to retirement age (OECD, 2022[21]). However, many different glide paths are possible and other types of investment strategies may also be suitable. The OECD (2020[17]) provides a framework to assist countries to select the most appropriate default investment strategy given the role and features of the DC scheme, as well as the population’s level of risk aversion. The mandatory asset-backed DC schemes for public-sector workers (GPF) in Thailand followed this framework to define the glide path of the default life-cycle investment strategy it introduced in 2023.
Moreover, countries should revise the investment framework of asset-backed pension schemes to allow for more diversification. The OECD Core Principles of Private Pension Regulation indicate that “investment regulation should be based on prudential principles such as diversification, dispersion, maturity and currency risk management” (OECD, 2016[28]). Minimum levels of investment in certain asset classes, such as domestic government bonds, should therefore be avoided as they could impede adequate diversification and increase concentration risk. Such investment floors may also prevent pension funds from investing more in riskier asset classes, such as equities and corporate bonds, even though such a strategy could be in the best interests of plan members given the long-term investment horizon of retirement savings. More investment in equities and corporate bonds would also help to develop local capital markets and to finance the economy.
Portability
Countries should consider transforming unfunded DB severance schemes into asset-backed pension schemes to allow workers to build up pension entitlements over their entire career when the schemes’ objective is to help finance retirement.33 There is no portability of severance benefits when changing employers. Workers get a lump sum corresponding to the number of years of service with their past employer, and in Indonesia and the Philippines, only the years of service with the last employer at the time of retirement count. In the latter case, employers may be reluctant to hire people close to retirement age to avoid having to pay severance benefits. Workers should be able to accumulate pension entitlements over their career instead of starting over whenever they change employers. In line with this, Indonesia is considering integrating the retirement severance pay into the mandatory schemes for private-sector employees (BPJS – JP and JHT), mandating employers to pay contributions to finance future benefits. In the Philippines, the Capital Markets Development Act of 2021 proposed the introduction of a new mandatory, fully funded and portable occupational pension system to substitute the retirement pay system. The bill received the Congress’ approval but is still awaiting the Senate’s approval. In Pakistan, the federal government and the Punjab province permit employers to offer voluntary personal pension plans (VPS) instead of gratuity or provident funds. This allows employees to carry with them the assets already accumulated when changing employers.
Countries should also ensure the portability of pension entitlements across different pension schemes. Most countries have separate mandatory pension schemes for public and private-sector workers. The rules of the schemes are different, usually granting higher pension entitlements to public-sector employees. Moreover, a minimum number of years of service is required to be entitled to pension benefits in DB schemes (Table 2.5). These aspects may impede labour mobility between the public and private sectors. In extreme cases, workers may lose some of their entitlements by switching between sectors. For example, in Thailand, someone working 23 years in formal employment, 9 years as a civil servant and 14 years as a private-sector employee, will only get a lump sum from the scheme for private-sector employees (SSF Article 33). One way to improve the portability of pension entitlements is to sum up the number of years of service under different schemes. This is the case for example in the Philippines, where individuals who have worked in the public and private sectors during their career but do not qualify for a pension under either of the pension schemes (they have less than 15 years of participation in the GSIS and less than 10 years of participation in the SSS) can add up their periods of contributions under both schemes to reassess eligibility. If the total period exceeds 10 years (the minimum requirement under the SSS), the individual receives a monthly pension at retirement from both the SSS and the GSIS proportionally to the contributions made under each scheme. Countries should also consider aligning the pension schemes for public and private-sector employees to promote equity and labour mobility, as is the case in Viet Nam. Most OECD countries have aligned or unified systems for civil servants and private-sector employees (OECD, 2016[29]).
Pension schemes should be able to efficiently administer members’ accounts. In Pakistan, accounts with zero balances tend to remain open when members move to another pension fund manager or withdraw all their funds. Members should also be able to retain a single account within a pension scheme, even if taking a break from contributions or changing employers. In Sri Lanka, for example, people get a new account in the mandatory pension scheme for private-sector employees (EPF) every time they change employers. Streamlining accounts would help to prevent individuals from accumulating several small accounts and help to improve operational efficiencies thereby reducing costs for members.
Early access to savings
Countries should limit early withdrawals to individuals’ exceptional hardship circumstances. Early withdrawal possibilities may increase participation in asset-backed DC pension schemes as they reassure savers that at least part of their money will be accessible in case of need. However, early access to retirement savings could jeopardise retirement income adequacy. A single withdrawal of 10% of accumulated assets could result in a 2% to 9% reduction in pension income depending on the age at the time of withdrawal (30, 45 or 60), with older people experiencing a larger impact as they have accumulated larger balances (OECD, 2020[17]). The OECD Recommendation for the Good Design of Defined Contribution Pension Plans states that “any early access to retirement savings should be a measure of last resort and based on individuals’ specific hardship circumstances”, such as financial hardship or severe illness (OECD, 2022[21]).
Countries could introduce emergency savings accounts within pension schemes to help individuals increase their financial resilience. Arrangements combining short-term and long-term savings could help individuals face emergencies without tapping into their retirement savings. Ideally, contributions to the emergency account should come in addition to the contributions to the retirement savings account to avoid reducing future retirement income. Malaysia recently introduced a three-pot system within the mandatory pension scheme for private-sector employees (EPF), much like Singapore. Prior to May 2024, 30% of the contributions went to the limited withdrawal account from which money could be withdrawn under specific circumstances, such as the purchase of a home, education, or for health issues, and 70% of the contributions went to the retirement account with no possibility for early withdrawals. Since May 2024, there is now a third account from which members can withdraw money at any time for any reason, subject to a minimum withdrawal amount of MYR 50. Of the total contributions, 75% now go to the retirement account, 10% to the limited withdrawal account and 10% to the fully flexible account. Therefore, more contributions are now locked in until retirement, while additional flexibility is provided to savers.
Payout options
Pension schemes representing the main source of retirement income should provide some level of lifetime income (OECD Recommendation for the Good Design of Defined Contribution Pension Plans) (OECD, 2022[21]). Mandatory asset-backed DC schemes only provide lump sum or drawdown payments, leaving individuals managing longevity risk by themselves. However, as these schemes are expected to be the primary source of retirement income for their members, they are likely to be used to finance individuals’ essential spending in retirement. Payout options with a guaranteed lifetime income (i.e. lifetime annuities) are best suited for meeting essential spending needs because they ensure that the individual will have a certain level of income for life (OECD, 2024[30]). Nevertheless, there should be some flexibility for circumstances where this type of option may not be the most suitable, such as when individuals are in poor health or if they have not saved enough to obtain a meaningful level of lifetime income (OECD, 2024[30]).
Countries could consider establishing public annuity providers to service lifetime income payments for publicly provided pension plans, or to ensure the supply of lifetime income products when the private sector is unable to do so at a competitive price. Several OECD countries with mandatory or quasi-mandatory asset-backed pension schemes, such as Denmark, Lithuania and Sweden, rely on publicly established institutions to provide lifetime income payments to members in retirement. Other countries, such as Croatia and Singapore, have public annuity providers that operate alongside private providers to promote competition in the market, thereby ensuring the availability of cost-efficient products. Public annuity providers should have robust risk management frameworks in place to manage risk exposures and ensure that they will have sufficient capital to make the lifetime payments to their members. Absent such requirements, the government would effectively act as the backstop of the provider in case of any solvency problems, which would unfairly shift the cost and risk of providing lifetime income products to the taxpayers.
Countries could also consider allowing non-guaranteed lifetime income options. Non-guaranteed lifetime income options provide longevity protection to retirees while limiting the risk exposure to providers, which could help to promote the availability of lifetime income options for pensioners. These types of products pool the longevity risk of participants and provide regular income payments, but unlike regular lifetime annuities, the level of the income is adjusted up or down depending on the actual investment and longevity experience of the plan. As such, it is the participants of the plan who collectively bear the investment and systemic longevity risks, while still being protected from idiosyncratic longevity risk of living longer than the average life expectancy. In addition, as payments are not guaranteed, banks and asset managers could offer such products, not only life insurance companies (OECD, 2022[31]).
Finally, countries could encourage and facilitate the provision and uptake of personalised guidance. Guidance at retirement aims to engage individuals in their decision regarding how to finance retirement with their accumulated savings and to give them the necessary information and tools to make the decision themselves (OECD, 2024[30]). Personalised guidance not only presents and explains the different options, but it also provides suggestions to individuals regarding which option is likely to be appropriate given their general characteristics. Financial advice goes even further as it aims to indicate the most suitable payout options given the individual’s specific needs and circumstances. As such, it is more resource intensive than personalised guidance (OECD, 2024[30]). Malaysia set up a financial advice service for members of the mandatory pension scheme for private-sector employees (EPF) in 2014. The Relationship & Advisory (RA) programme, previously known as the Retirement Advisory Service (RAS), is free of charge for EPF members and aims to guide them at different life stages to assess their current financial situation and future needs, define financial goals and strategies to achieve them, plan for retirement and manage their finances after retirement. Since its launch in July 2014, the programme has supported over 542 000 EPF members (out of 8.8 million active members) through face-to-face advisory sessions conducted by certified RA officers. Additionally, RA officers have conducted financial literacy talks for the public, reaching an estimated audience of approximately 1.5 million people since February 2016. The programme has been successful at encouraging members not to withdraw all their savings as a lump sum and to draw down their savings more gradually over time.
References
[14] EPF (2023), Employees’ Provident Fund Annual Report 2022, https://epf.lk/wp-content/uploads/2024/05/Annual-report-English-2022.pdf.
[13] ILO (2022), Thailand Social Protection Diagnostic Review: Review of the pension system in Thailand, https://www.ilo.org/asia/publications/labour-markets/WCMS_836733/lang--en/index.htm.
[33] Kementerian Keuangan Republik Indonesia (2024), Harmonization of Pension Programs in Indonesia: Initiative to Improve Old-age Protection and Advancing Public Welfare - DRAFT.
[15] MUFAP (2025), MUFAP 2024 Yearbook, https://mufap.com.pk/Upload/WebDoc/Communication/Yearbook3070.pdf.
[3] OECD (2024), Annual Survey of Investment Regulation of Pension Providers 2024, https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/asset-backed-pensions/2024-Survey-of-Investment-Regulation-of-Pension-Providers.pdf.
[1] OECD (2024), Annual survey on financial incentives for retirement savings: Country profiles 2024, OECD Publishing, Paris, https://doi.org/10.1787/16d0283c-en.
[2] OECD (2024), “Assessing the design of financial incentives for retirement savings in OECD countries”, in OECD Pensions Outlook 2024: Improving Asset-backed Pensions for Better Retirement Outcomes and More Resilient Pension Systems, OECD Publishing, Paris, https://doi.org/10.1787/51510909-en.
[30] OECD (2024), “Designing the payout phase for defined contribution pensions to better meet financial needs in retirement”, in OECD Pensions Outlook 2024: Improving Asset-backed Pensions for Better Retirement Outcomes and More Resilient Pension Systems, OECD publishing, Paris, https://doi.org/10.1787/51510909-en.
[19] OECD (2024), “Improving access to asset-backed pension plans through arrangements pooling multiple employers”, in OECD Pensions Outlook 2024: Improving Asset-backed Pensions for Better Retirement Outcomes and More Resilient Pension Systems, OECD Publishing, Paris, https://doi.org/10.1787/51510909-en.
[12] OECD (2024), Pension Markets in Focus 2024, OECD Publishing, Paris, https://doi.org/10.1787/b11473d3-en.
[7] OECD (2024), Pensions at a Glance Asia/Pacific 2024, OECD Publishing, Paris, https://doi.org/10.1787/d4146d12-en.
[18] OECD (2022), “How best to involve employers in the provision of asset-backed pension arrangements”, in OECD Pensions Outlook 2022, OECD Publishing, Paris, https://doi.org/10.1787/20c7f443-en.
[31] OECD (2022), “Policy lessons for the design, introduction and implementation of non-guaranteed lifetime retirement income arrangements”, in OECD Pensions Outlook 2022, OECD Publishing, Paris, https://doi.org/10.1787/1f1cdca9-en.
[21] OECD (2022), “Recommendation of the Council for the Good Design of Defined Contribution Pension Plans”, OECD/LEGAL/0467, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0467.
[25] OECD (2021), “Gender implications of the design of retirement savings plans”, in Towards Improved Retirement Savings Outcomes for Women, OECD Publishing, Paris, https://doi.org/10.1787/f7b48808-en.
[24] OECD (2020), “Recommendation of the Council on Financial Literacy”, OECD/LEGAL/0461, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0461.
[17] OECD (2020), “Retirement savings and old-age pensions in the time of COVID-19”, in OECD Pensions Outlook 2020, OECD Publishing, Paris, https://doi.org/10.1787/67ede41b-en.
[5] OECD (2020), “Selecting default investment strategies”, in OECD Pensions Outlook 2020, OECD Publishing, Paris, https://doi.org/10.1787/67ede41b-en.
[6] OECD (2019), “Are funded pensions well designed to adapt to non-standard forms of work?”, in Pensions at a Glance 2019: OECD and G20 Indicators, OECD Publishing, Paris, https://doi.org/10.1787/b6d3dcfc-en.
[16] OECD (2019), “Non-standard forms of work and pensions”, in Pensions at a Glance 2019: OECD and G20 Indicators, OECD Publishing, Paris, https://doi.org/10.1787/b6d3dcfc-en.
[20] OECD (2019), “The role of automatic enrolment schemes in enhancing funded pension systems’ inclusiveness and retirement income adequacy”, in Financial Markets Insurance and Pensions: Inclusiveness and Finance, https://www.oecd.org/content/dam/oecd/en/publications/reports/2019/01/financial-markets-insurance-and-pensions-2019_04d48a68/6e9e00ea-en.pdf.
[22] OECD (2018), “Are financial incentives effective tools to increase participation in and contributions to retirement savings plans?”, in Financial Incentives and Retirement Savings, OECD Publishing, Paris, https://doi.org/10.1787/9789264306929-en.
[23] OECD (2018), “Policy guidelines to improve the design of financial incentives to promote savings for retirement”, in Financial Incentives and Retirement Savings, OECD Publishing, Paris, https://doi.org/10.1787/9789264306929-en.
[29] OECD (2016), “Civil service pensions: Toward a unified system with the private sector”, in OECD Pensions Outlook 2016, OECD Publishing, Paris, https://doi.org/10.1787/pens_outlook-2016-en.
[28] OECD (2016), OECD Core Principles of Private Pension Regulation, OECD Publishing, Paris, https://doi.org/10.1787/c950bb36-en.
[10] OJK (2024), A Glance of Indonesia Pension Program.
[11] OJK (2022), Statistik Dana Pensiun 2022, https://ojk.go.id/id/kanal/iknb/data-dan-statistik/dana-pensiun/Documents/Pages/Buku-Statistik-Dana-Pensiun-2022/Buku%20Statistik%20Dana%20Pensiun%202022.pdf.
[9] Rosedewayani, S. (2017), Fiscal and other incentives for pension and saving schemes in Indonesia, https://www.ojk.go.id/id/kanal/iknb/berita-dan-kegiatan/info-terkini/Documents/Pages/OJK-dan-World-Bank-Gelar-Indonesia-Pension-Conference/Session3_Pension%20Day_Fiscal%20and%20Other%20Incentive_Santhi%20Devi%20WTW_v4.pdf.
[32] SSO (2021), Annual Report 2021, https://www.sso.go.th/wpr/main/privilege/%E0%B8%A3%E0%B8%B2%E0%B8%A2%E0%B8%87%E0%B8%B2%E0%B8%99_sub_category_list-label_1_130_716.
[8] SSO (2017), Annual Report 2017, https://www.sso.go.th/wpr/main/privilege/%E0%B8%A3%E0%B8%B2%E0%B8%A2%E0%B8%87%E0%B8%B2%E0%B8%99_sub_category_list-label_1_130_716.
[4] ThaiPVD (2022), Provident Fund Performance Report For the Second Half of 2022, https://www.thaipvd.com/document/%E0%B8%82%E0%B9%89%E0%B8%AD%E0%B8%A1%E0%B8%B9%E0%B8%A5%E0%B8%AA%E0%B8%96%E0%B8%B4%E0%B8%95%E0%B8%B4.
[26] World Bank (2023), Thailand public revenue and spending assessment: Promoting an inclusive and sustainable future, https://www.worldbank.org/en/country/thailand/publication/th-prsa.
[27] World Bank (2019), Thailand: Staff report for the 2019 Article IV Consultation, https://www.imf.org/en/Publications/CR/Issues/2019/10/07/Thailand-2019-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-48724.
← 1. This chapter distils experiences and policy lessons from Indonesia, Malaysia, Pakistan, the Philippines, Sri Lanka, Thailand and Viet Nam. It describes the rules of the pension system of Viet Nam as specified in the 2024 Social Insurance Law, which was passed in June 2024 and is effective as of 1 July 2025.
← 2. This proportion includes public-sector employees and the armed forces and military.
← 3. The informal sector is defined as industrial units that are not registered, companies with less than 10 employees and companies with no regular employees. It does not include the agricultural sector.
← 4. This proportion includes public-sector employees (9% of total employment).
← 5. OECD calculations based on national labour force surveys referring to various periods between 2020-21 and Q2 2024.
← 6. In Viet Nam, providers may require individuals to commit to contribute for a minimum period, e.g. five or ten years.
← 7. It is common practice in Indonesia for employers to use occupational pension plans to finance their mandatory severance benefits.
← 8. In the Philippines, it is not mandatory for employers to put money aside in a sperate fund to finance benefits from occupational pension plans. However, most employers do.
← 9. Around 10% of SSS members contributed based on the minimum salary credit in 2024.
← 10. Lump sums above that threshold are taxed at 5% and annuities are taxed at the individual’s marginal income tax rate.
← 11. Overseas Filipinos can contribute twice as much as domestic workers (PHP 400 000 instead of PHP 200 000) as they are less likely to be able to use the tax credit.
← 12. Only contributions up to 20% of taxable income are considered for the tax credit.
← 13. The income threshold below which individuals do not pay personal income tax varies from 82% of the average wage in Thailand to 352% of the average wage in Sri Lanka.
← 14. The SSF Article 40 has three contribution options. Under option 1, members contribute THB 70 and the government contributes THB 30 per month. Under option 2, members contribute THB 100 and the government contributes THB 50 per month. Under option 3, members contribute THB 300 and the government contributes THB 150 per month. Only options 2 and 3 cover old-age benefits, as well as other benefits such as healthcare, disability and death benefits depending on the chosen option.
← 15. Following the government’s privatisation policy since the 1990s, the issuance of government securities has declined and the EPF has been exempted from the minimum investment requirement.
← 16. In Malaysia, contributions to the mandatory asset-backed DC scheme for private-sector employees (EPF) are split between three accounts for members under the age of 55: 75% of the contributions are paid into the retirement account and cannot be withdrawn before age 55, 15% are paid into the well-being account and can be withdrawn under selected conditions, and 10% are paid into the flexible account and can be withdrawn for any purpose.
← 17. Men with less than 20 years of participation, but at least 15, are entitled to a monthly pension equal to 40% of their average salary with 15 years of participation (2.25% yearly accrual rate) and accrue 1% for each additional year between 15 and 20 years (thereby equalling 45% of average salary with 20 years of participation).
← 18. Pension benefits may be paid as a single lump sum under specific conditions. These conditions are different for employer pension funds (DPPK) and financial institution pension funds (DPLK).
← 19. In Indonesia, the benefit varies between 1.75 to 25.75 times the last salary depending on service duration. In Pakistan, the benefit is equal to the last pay or the highest pay over the past 12 months multiplied by the number of years of service. In the Philippines, the benefit is equal to one-half month salary multiplied by the number of years of service, with one-half month salary including 15 days of pay, 5 days of service-incentive leave and one-twelfth of the 13th month pay. In Sri Lanka, the benefit is equal to 15 days of wages for each completed year of service.
← 20. Based on a more realistic assumption of 32 years of participation (instead of 43 years), the Indonesian Ministry of Finance calculates a replacement rate from the BPJS schemes of 27.4% (Kementerian Keuangan Republik Indonesia, 2024[33]).
← 22. The number of informal workers insured under the SSF Article 40 increased significantly from 3.5 million in 2020 to 10.7 million in 2021 (SSO, 2021[32]).
← 23. The average contribution per year is slightly higher for overseas Filipino workers, at PHP 14 892. This is in line with their higher annual contribution limit (PHP 400 000).
← 24. Data do not include investment in public pension reserve funds that are meant to help finance future expenditures from PAYG and tax-financed pension schemes.
← 25. For Malaysia, the contribution rate of 24% only applies to Malaysians and permanent resident workers under the age of 60 and earning up to MYR 5 000 per month. Lower contribution rates apply for employees earning more than MYR 5 000 per month and for employees aged 60 and above.
← 26. Self-employed workers can pay more regular contributions if they so wish. This flexibility is important as some self-employed workers do not have a regular income stream on which to collect monthly contributions.
← 29. SSS partners with CDA to strengthen social security coverage and protection among members of cooperatives | Republic of the Philippines Social Security System
← 30. Philippine pension SSS inks deal to extend pension coverage to farmers, fisherfolk | Asia Asset Management
← 31. SSS, Angkas tie up to provide social security benefits for motorcycle taxi riders - Manila Standard
← 32. Canada, Germany, Italy, Lithuania, New Zealand, Poland, the Slovak Republic, the Republic of Türkiye, the United Kingdom and the United States.
← 33. If not going through a transformation, countries should at least consider removing the possibility for employers to use assets in occupational pension plans to fully or partially offset their obligations under DB severance schemes, as is the case in Indonesia and the Philippines. As an example, Hong Kong (China) abolished the MPF offsetting arrangement in 2022. Employers can no longer use accrued benefits derived from employers’ mandatory contributions to the Mandatory Provident Fund (MPF) to offset employees’ severance payment and long service payment in respect of the years of service starting from 1 May 2025. In parallel, the Labour Department launched a 25-year subsidy scheme to ease the additional financial burden on employers.