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The Social Security System (SSS) has lauded Malacañang’s support for preserving the pension fund’s long-term sustainability, following President Benigno S. Aquino III’s decision to veto House Bill 5842 which seeks an across-the-board SSS pension increase of P2,000.
SSS President and Chief Executive Officer Emilio S. de Quiros, Jr. said that the proposed increase would have consequences for both the 2.15 million current pensioners and 31 million members. At least P56 billion would be needed to fund the additional P2,000 benefit for the 2.15 million pensioners annually.
“The P2,000 pension increase would lead to a projected deficit of P26 billion for 2016 from an expected income of P41 billion. As the number of pensioners grows, the initial P56 billion in additional benefit outlay per year would increase, which in turn contributes to the rising annual deficit or net loss incurred by SSS,” de Quiros said.
SSS funds, projected to last until 2042 or 26 years from now, would be wiped out by 2029 or in 13 years, as presented to Congress in June 2015, due to recurring net losses caused by the P2,000 pension increase. However, given the low market sentiment and the need for SSS to divest P47 billion to P51 billion in financial assets to fund the increase in pension benefit, the fund life would be further reduced to 2027.
“The P2,000 increase and resulting shorter fund life will greatly affect our 33 million members and pensioners as well as their dependent spouses, minor children and other beneficiaries who are also mandated to receive their own share of SSS benefits,” de Quiros said.
In terms of absolute value, the state-run agency provides members a generous return of P6 to P15 in benefits for every peso they contribute to the SSS.
“SSS financial gains since 2010 to further improve the stability of the fund would be negated if the P2,000 pension increase was approved. It would be shortened to an alarming 11-year period from now,” de Quiros said.
SSS fund life has been strengthened by various financial achievements over the past few years. Annual net revenues, for example, averaged P33 billion from 2010 to 2014, much higher than the P8 billion average for 2000 to 2009; assets grew by 50 percent from P298 billion as of 2010 to P447 billion as of October 2015; and contributions collected by SSS per year were also more than enough to cover expenses for benefits and operations since 2012, with the annual investment income stored in the reserve fund. More than 100 offices were also established since 2010 to bring SSS closer to members.
Social Security Commission Representative for the General Public Michael Victor N. Alimurung noted that it is risky to compel SSS to implement a drastic pension increase as proposed by a bill silent on any source of funding, and just pin hopes on the next administration to avert the depletion of SSS funds.
“Unpopular as the veto decision may be, it was the right thing to do. It shows that the President is principled enough to withstand pressure, by refusing to support a bill that he knows will lead to the financial ruin of the SSS. With the Malacañang decision, we continue to further strengthen the SSS to become sustainable and viable,” he added.
To implement the P2,000 pension increase and still maintain the present fund life of 26 years, the contribution rate needed to be increased from the present 11 percent to 15.8 percent. In the absence of a contribution rate increase, the government would have to provide a minimum annual subsidy of P130 billion per year starting 2030, after the SSS investment reserve fund has been fully exhausted.
De Quiros, meanwhile, said that “the SSS will continue with its mission to implement measures that would truly redound to the financial stability of the institution, extend meaningful benefits, and maintain the trust and confidence of the present and future stakeholders.”