The demographical clock is ticking across the Asia-Pacific, and as populations live longer government policy changes on retirement funds mean in-house counsel must keep pace with compliance. ABLJ staff report
The Asia-Pacific is confronting a concerning demographic shift, with ageing populations emerging as a systemic regional challenge rather than a localised issue. The World Economic Forum reports that by 2050, one in four people will be aged over 60, with the region expected to have reached nearly 1.3 billion senior citizens in under 30 years.
Labour force participation is also expected to decline, according to an article from Lewis Silkin lawyers Madeleine Jephcott, Catherine Leung and Vanessa Ip, falling from 61% in 2023 to 55% by 2050, driven largely by the growing proportion of individuals aged 65 and above. These worrying signs have set alarm bells ringing across multiple jurisdictions in the region, prompting governments to act by introducing reforms that span multiple aspects of working life, from higher social security contribution rates to increases in retirement ages.
A convergence of structural factors, including declining birth rates and increased life expectancy, are intensifying pressure on social security systems. Additionally, younger workers are contributing less consistently to pension schemes than previous generations, while higher unemployment, wage stagnation and changing attitudes to traditional work further strain funding mechanisms. Together, these dynamics are pushing many jurisdictions towards a critical inflection point.
“This unholy trinity of factors has created a real and pressing financial pressure: pensions schemes need to be stretched over longer periods, but they aren’t being contributed to fast enough to keep up with those changes,” says Fatim Jumabhoy, a Singapore-based partner and head of Herbert Smith Freehills Kramer’s (HSF Kramer) employment and workplace investigations practice in Asia.
The impact, however, extends beyond employees. Employers are also facing mounting pressures, including higher contribution costs and an evolving compliance landscape driven by regulatory change.
“It is inevitable, therefore, that pension contribution rates will increase. This is challenging, particularly in the current economic environment where cost of living concerns are high in the minds of both employers and employees,” says Jumabhoy.
Together, these developments signal a significant shift as both employers and employees adapt to the structural realities of an ageing population.
The ageing reality
Ageing populations across multiple jurisdictions are driving governments to act to ensure that employees remain financially self-sufficient in retirement. This focus has prompted a range of social security reforms, including higher contribution rates and incremental rises in retirement ages.
Hong Kong is projected to have the highest share of people aged 65 and older by 2050, with 46.4% of the population falling within that category, according to Statista, a global data and business intelligence platform. As a result, discussions have been underway since March 2026 about amending the Mandatory Provident Fund (MPF), marking the first potential reform in 13 years. Proposals centre on raising the minimum and maximum relevant income levels from HKD7,100 (USD906) and HKD30,000, to HKD10,000 and HKD40,000, respectively.
Under the current framework, both employers and employees contribute 5% of an employee’s salary, subject to a cap of HKD1,500 each. The Mandatory Provident Fund Schemes Authority (MPFA) is considering increasing this cap to HKD2,000 – a 33% rise. If implemented, employees earning below HKD10,000 would no longer be required to make contributions.
Cynthia Chung, head of the employment and pensions practice at Deacons in Hong Kong, says the higher thresholds may allow employees to “have more of a financial buffer at retirement, which is the main point of having the MPF system”.
South Korea faces a similar dilemma as 39.7% of the population is forecast to be 65 and older by 2050.
In January 2026, the South Korean government raised the National Pension contribution rate from 9% to 9.5%, marking the first increase in 27 years. The rate is scheduled to rise by 0.5 percentage points annually, until it reaches 13% in 2033. Employees and employers must each also absorb an additional financial burden of 0.25 percentage points annually over the next eight years.
On top of that, the government is currently considering extending the statutory retirement age, and increasing the mandatory National Pension enrolment age from 59 to 64.
China faces its own set of problems as one of the world’s fastest ageing populations. The World Health Organisation estimates that by 2040, 402 million people, or 28% of the population, will be aged over 60. Combined with the legacy of the one-child policy, the country now faces a structural imbalance between retirees and new labour market entrants.
In response, authorities are raising the retirement age amid a decreasing labour market and cash-strapped pension system. The Chinese Academy of Social Sciences says pension funds could be depleted by 2035.
From 1 January 2025, China began a 15-year phased increase in the statutory retirement age. The retirement age for men will rise from 60 to 63. For women, it will increase from 50 to 55 for blue-collar workers, and from 55 to 58 for white-collar employees. Additionally, from 1 January 2030, the minimum contribution period required to qualify for pension benefits will be gradually extended from 15 to 20 years, with incremental increases implemented every six months.
“I believe this new policy regarding an increase in contribution duration to pension funds was not rooted in the financial burden of enterprises, but more likely from the heavy burden of payouts by the social security fund,” says John Dong, a senior partner at Baohua Law Firm in Shanghai.
China’s pension system comprises three pillars: a mandatory basic pension scheme (24% total contributions, with employers contributing 16% and employees 8%); occupational and enterprise annuities; and private pension annuities. Occupational annuities are mandatory as well, and apply to civil servants and public sector employees (8% employer, 4% employee), while enterprise annuities are voluntary, supplementary retirement schemes primarily utilised by state-owned enterprises and private corporations. Private pension annuities are also voluntary and enable employees to deposit up to RMB12,000 (USD1,771) annually into a private pension account.
Dong says more changes to China’s pension scheme are likely. “I expect further pension-related developments in the coming years, accompanied by a series of implementing regulations, particularly in areas such as delayed retirement age, expansion of personal pension programmes, and stricter enforcement of social insurance compliance … The fast demographic ageing of China is forcing the pension system to self-adapt,” he says.
Japan became a super-aged society in 2007, defined as a jurisdiction where more than 21% of the population is aged 65 or older. The demographic shift has only deepened since then. As of 2025, around 30% of Japan’s population is aged over 60, according to the World Health Organisation. Statista forecasts that 37.5% of the population will be aged 65 and above by 2050.
The impact is already visible in the labour market, with the employment rate for people aged 65 to 69 reaching 52% in 2023, continuing an upward trend, according to Japan’s Ministry of Internal Affairs and Communications.
In response, Japan amended its Act on Stabilisation of Employment of Elderly Persons in April 2021, introducing a duty of endeavour for employers to secure employment opportunities up to age 70.
These structural pressures are also reshaping Japan’s pension framework. In December 2024, ruling parties published the 2025 Tax Reform Outline, updating the corporate defined contribution (DC) pension systems.
One key change is the increase in the monthly contribution limit for DC pension plans from JPY55,000 (USD342) to JPY62,000. Another major reform is the removal of restrictions on employee voluntary DC contributions. Previously, employee matching contributions could not exceed employer contributions. This restriction will be abolished, allowing employees to contribute more flexibly, provided total contributions remain within statutory limits.
Australia’s population continues to age steadily as well. In 2020, the Australian Institute of Health and Welfare stated that there were an estimated 4.2 million Australians aged 65 and above, representing 16% of the total population. By 2066, they are projected to account for up to 23% of the population.
As demographic pressures intensify, concerns over retirement savings compliance have come into sharper focus. The Super Members Council reported that, from 2018 to 2023, one in four Australian workers had been underpaid in their superannuation contributions, reaching a total of AUD24.4 billion (USD17.15bn).
In response, Australia is tightening up its enforcement. From 1 July 2026, employers will be required to pay superannuation contributions at the same time as wages and salaries, replacing the current quarterly payment system.
“More frequent and earlier super contributions will grow and compound over a worker’s lifetime. For an average 25-year-old worker, this is estimated to equate to an additional AUD6,000 in today’s dollars at retirement,” says Maged Girgis, a partner at HSF Kramer in Sydney specialising in financial services and advising superannuation fund and life insurance clients.
Singapore’s Central Provident Fund (CPF) underwent changes on 1 January 2026, with the Ordinary Wage (OW) ceiling rising from SGD7,400 (USD5,745) to SGD8,000 and contribution rates increasing for older employees. Contribution rates for those aged 55 to 60 increased from 32.5% to 34%, and for those aged 60 to 65 from 23.5% to 25%, while rates for employees aged 55 and below remained at 37%.
Teo Mae Shaan, a partner at Shook Lin & Bok in Singapore, says the higher OW ceiling will improve retirement savings for mid to higher-income earners.
“The raised ceiling would better equip middle-income workers to achieve their full or even enhanced retirement sums quicker,” says Teo.
She says the increases reflect longer life expectancy and retirement adequacy needs as Singaporeans aged 65 in 2025 can expect to live to 86.6 years, according to preliminary data from the city-state’s Department of Statistics.
“An additional decade or more of higher CPF contributions for workers from age 55 will boost retirement adequacy for both current and future workers, especially for those who rejoined the workforce later or had lower lifetime wages,” she says.
Contribution rates will continue to rise, with Prime Minister Lawrence Wong announcing in his Budget 2026 speech that contributions for those aged 55 to 60 will rise to 35.5% as part of a longer-term target of 37% by 2030, and to 26% for those aged 60 to 65.
Joel Tan, director, corporate and M&A and a member of the employment practice at Drew & Napier in Singapore, says more changes could be on the way.
“The CPF framework is likely to continue evolving to address Singapore’s ageing population and longer life expectancy, as well as to support the CPF’s objectives of helping Singaporeans set aside savings for retirement, housing and healthcare needs,” he says.
Gradual changes
Not all Asian countries are facing an urgent need for social security reform. Although the Philippines’ fertility rate declined from 4.1 children per adult woman in 1993 to 1.7 in 2025, it remains relatively high compared to many other Asian nations.
Unlike rapidly ageing APAC economies, the Philippines is not yet undertaking sweeping pension reforms. Instead, recent changes have focused on gradually strengthening the long-term sustainability of the Social Security System (SSS), which is the primary agency for private-sector employees in the Philippines, providing financial protection against contingencies such as sickness, retirement or death.
One of the most significant recent changes came into effect when the SSS implemented the contribution increase under Republic Act No.11199, which came into effect in 2019. The total contribution rate rose from 14% to 15%, with the employer share increasing from 9.5% to 10% and the employee share from 4.5% to 5%.
“The main purpose is to strengthen the financial condition of the SSS and help ensure that it can continue paying benefits in the long term,” says Rashel Ann Pomoy, deputy managing partner and deputy head of the labour and employment department at Villaraza & Angangco in Manila.
Indonesia, too, may not face the same degree of demographic pressure as some other jurisdictions, and its social security regime remains steady. Under the current system, both employers and employees need to make mandatory contributions to the Manpower Social Security Administrator (BPJS Ketenagakerjaan). Pension benefit contributions currently stand at 3% of monthly wages (2% employer, 1% employee), while old-age benefits total 5.7% (3.7% employer, 2% employee).
While Indonesia and the Philippines may not face the same level of demographic pressure as some other jurisdictions, HSF Kramer’s Jumabhoy says reforms may still be on the horizon to address gradually ageing populations and declining birth rates, both of which are expected to have a discernible impact on pension systems.
“However, the markets are very different, and the TFR (total fertility rate) in the Philippines is lower than the replacement rate, whereas Indonesia has not yet reached the tipping point. It is also important to take account of unemployment figures – both the Philippines and Indonesia have higher rates than Hong Kong, South Korea or Japan,” she says.
“Ultimately, as economies develop, the ageing population and declining birth rates issues become more prominent, and the pensions gap starts to widen. Measures will undoubtedly need to be implemented to address this. The speed of implementation will vary, though.”
Meanwhile, Thailand will implement the Employee Welfare Fund (EWF), which will introduce additional statutory employment costs and compliance obligations for employers operating in the country, from 1 October 2026. However, Thanyaluck Thongrompo, partner and head of the regulatory, permits and licensing practice at Kudun and Partners in Bangkok, says the EWF’s contribution rates are “relatively modest”.
Under the regulations, both employers and employees will contribute at an initial rate of 0.25% of monthly wages from 1 October 2026 to 30 September 2030, increasing to 0.5% from 1 October 2030 onwards.
The EWF is expected to strengthen employee confidence and labour market stability by providing additional financial protection to employees who are not currently covered by the provident fund arrangements, which remains voluntary in most sectors.
Against the clock
The rise of social security reforms throughout much of Asia is poised to increase compliance requirements for employers and their in-house counsel.
In Hong Kong, cost implications for employers – particularly SMEs – remain a concern.
“For especially small and medium-sized companies with a sizeable cohort of mid-level managers making HKD40,000 per month, this increase could add up to be a significant financial cost, especially when many businesses are still recovering,” says Chung at Deacons.
Andrea Randall, head of Reynolds Porter Chamberlain’s employment team in Hong Kong, says that operational readiness will also be key for employers. “Employers will need to update payroll and HR systems to reflect the new thresholds and communicate the changes clearly to employees, particularly those whose net pay will be affected,” she says.
The MPFA is collecting feedback from different stakeholders and is set to submit a review report in mid-2026.
“From an in-house counsel perspective, this should be viewed as a payroll and employment cost planning issue rather than a routine compliance update,” says Kat Kukreja, president of the Association of Corporate Counsel Hong Kong.
In South Korea, Young Hwan Kwon, a partner at Jipyong who mainly advises on human resource management/labour issues, says: “The increase [in the compensation rate] represents a structural driver of higher labour costs for employers and a structural drain on disposable income for employees.
“In South Korea’s labour market, where dismissing regular employees is difficult, this added financial burden may pressure companies into scaling back new hiring plans. Wage disputes between labour and management are poised to escalate, and bridging the divide between the two sides may prove exceedingly difficult.”
Chinese employers are also expected to face higher long-term labour and compliance costs. “With the newly legislated delayed retirement policy for aged employees, employers may need to retain employees for longer periods until pension eligibility, directly increasing long-term labour costs and social security contribution bases,” says Dong.
Leo Yu, a partner at Jingtian & Gongcheng in Shanghai and Beijing, says employers need to be cautious about potential disputes. “Historical issues such as underpayment, interrupted records or non-compliant contribution bases may surface as disputes when employees approach retirement, potentially exposing companies to significant back-payment costs and damages liability,” he says.
While the reforms in Japan are intended to strengthen retirement security, they also add to an increasingly challenging compliance landscape for employers. “The increasing complexity of coverage requirements has increased the administrative burden on employers in handling routine procedures such as enrolment and disenrollment, revisions to the standard monthly remuneration, and related filings,” says Kyoko Fukiya, vice president of the Japan In-house Lawyers Association.
The Japan Pension Service conducts inspections to verify whether businesses are properly administering employees’ pension insurance. “Employers therefore bear not only the burden of responding to such inspections, but also face risks such as retrospective collection of underpaid insurance premiums in the event that errors are identified,” says Fukiya.
In Australia, Girgis says employers should take the following steps, among other measures, to prepare for implementation:
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- Understand how the legislation will impact the business and its employees;
- Assess their current payroll system capability – not only to calculate and pay the superannuation contributions on time but also to cope with the complexities of their business; and
- Upgrade or optimise payroll systems as needed, ensuring that it integrates with Single Touch Payroll and super clearing houses.
Girgis says the reforms could reshape how employers and employees view retirement savings. “Payday Super will fundamentally change how businesses manage their super obligations,” he says. “But more than that, it will further cement the connection that employees have with their super, and the sense that superannuation forms part of their remuneration.”
In Singapore, with CPF contribution rates set to rise further, Tan says employers will feel the pinch. “For employers, this means higher employer CPF contribution costs for employees whose monthly ordinary wages exceed SGD7,400.”
Teo says employers must remain attentive to ongoing changes, given their direct impact on payroll policies. “With the upcoming changes, employers should build annual CPF adjustment cycles into their payroll governance rather than treating each change as an ad hoc event,” she says.
For Filipino employers, the higher contribution rate increases statutory payroll costs, particularly for businesses with large workforces or employees earning near the upper contribution threshold.
“Employers should update their payroll systems, employee deduction settings, employer contribution accruals, payslip templates, remittance processes and SSS payment/remittance procedures to reflect the January 2025 contribution table,” says Pomoy.
“The reform supports stronger social protection but may also make employers more sensitive to statutory labour costs, worker classification and payroll compliance.”
While major reforms may not be imminent, compliance risks remain in Indonesia. “Although there may not be any immediate new regulations concerning the Manpower BPJS, employers should not assume that compliance obligations will remain unchanged,” says Merari Sabati, managing partner of Arma Law in Jakarta, adding there are several mechanisms under the social security system that may prompt adjustments to employment practices and internal policies.
She says that annual adjustments to the maximum wage ceiling for pension contribution calculations and a gradual increase in retirement age – set to reach 65 by 2043 – will necessitate ongoing reviews of HR policies, employment agreements and retirement planning.
Sartono, managing partner of Dentons HPRP in Jakarta, says the government may intervene to provide support to both employers and employees in the future. “In light of the current global economic situation, including current fluctuations in exchange rates, we expect the government to introduce several stimulus measures and incentives to support the business community and also to provide greater protection and benefits for employees,” he says.
In Thailand, Kudun’s Thanyaluck says: “Employers will need to implement new payroll, reporting, registration and recordkeeping processes to ensure ongoing compliance with the regime. This may be particularly significant for labour-intensive businesses, multinational employers operating multiple Thai entities, and organisations relying on outsourced payroll providers.” For multinational employers and foreign investors, Thanyaluck says that the EWF is likely to be viewed as part of a wider shift towards increased employment regulation, alongside minimum wage adjustments, social security obligations, workmen’s compensation requirements and enhanced payroll compliance expectations.
“The implementation of the EWF may indicate continued policy movement towards expanded employee financial protection mechanisms,” says Thanyaluck.
The countdown
The challenge confronting governments is straightforward, but the solutions are not. As populations age and people live longer, pension systems must support retirees for extended periods while drawing contributions from a relatively smaller working-age population. “Governments have therefore naturally looked at ways to increase the pot from which those payments will be drawn – none of the options are attractive,” says Jumabhoy.
Across the region, policymakers are responding with a mix of measures. “Positive steps to introduce protections for older workers, strengthening age discrimination laws, introducing flexible working arrangements, and introducing family-friendly provisions are all steps in the right direction, but are simply not enough to bridge the gap quickly enough,” says Jumabhoy.
For employers, the implications are clear. As governments recalibrate retirement frameworks in response to demographic pressures, businesses will need to monitor legislative developments more closely, adapt payroll and compliance systems, and incorporate rising labour costs into long-term workforce planning.
