SSS profit down 8.5% to P40.7B in 2015

THE PROFIT of state-run pension fund Social Security System (SSS) dropped 8.5 percent to P40.7 billion in 2015 from P44.5 billion in 2014 as the increase in expenditures, especially members’ benefits, outpaced revenue growth.

To address issues on the viability of its reserve fund, the SSS was looking into recommendations such as raising members’ contribution rate as well as the retirement age.

Its latest unaudited financial statement showed that SSS revenues reached P162.1 billion last year, up 4.5 percent from P155.2 billion in 2014.

Members’ contributions rose to P132.6 billion from P120.7 billion in the previous year.

Amid weak markets, however, investment and other income declined to P29.5 billion from P34.5 billion a year ago.

Total expenditures, meanwhile, rose by a faster 9.7 percent to P121.4 billion from 2014’s P110.7 billion.

Benefit payments—disbursed for members’ death, disability, funeral grant, maternity, medical services, rehabilitation services, retirement and sickness—grew 9.7 percent to P112.6 billion from P102.6 billion in 2014.

Operating expenses also increased—the amount spent for personnel services went up 5.3 percent year-on-year to P5.8 billion, while maintenance and other operating expenses climbed 16.8 percent to P3.1 billion.

End-2015 reserves stood at P444.4 billion, higher than end-2014’s P427.2 billion.

According to the SSS, its updated 2011 actuarial valuation showed that as long as there would be no future across-the-board increase in pensions, the fund would last until 2042, but net revenues would become negative by 2034.

“The SSS, like most defined-benefit social security schemes, is faced with the reality of a less-than-ideal actuarial fund life and a considerable level of unfunded liabilities. The unfunded liability arises when the liability, or the difference between the present value of future benefits and operating expenses, present value of future contributions, less reserve fund, is positive,” it said. Its updated 2011 valuation pegged unfunded liability at P1.22 trillion.

“This current unfunded liability and fund life situation was caused in part by a structural imbalance, brought about by the mismatch of the increases in pension relative to the monthly salary credit ceiling and contribution rate. While pensions were increased 22 times since 1980 through across-the-board pension increases of up to 20 percent and increases in the minimum pension amount through Republic Act No. 8282, and the monthly salary credit ceiling was increased 12 times, the contribution rate, on the other hand, was only increased three times during the same period, from 8.4 percent to 9.4 percent in 2003, then to 10.4 percent in 2007 and finally to 11 percent in 2014,” the SSS noted.

“The effect of demographic change on the fund should also be recognized as there may not be enough contributors remitting to pay all the expenses and benefits of the growing number of pensioners due to declining population growth rate and lengthening life spans,” it added.

In this regard, the SSS said it had been conducting actuarial valuations and studies serving as the basis of policy reform recommendations.

“The recommendations mentioned in the valuations include, but not limited to, raising the contribution rate, raising the maximum monthly salary credit, initially raising the required contributing years to be entitled to retirement pension to 15 years, and raising the retirement age,” the SSS said.