Duterte urged to rethink plan to hike SSS pension

A group of prominent economists has asked President-elect Rodrigo Duterte to rethink his plan to increase the Social Security System (SSS) pension without funding measures, warning that this could deplete the state-owned fund by 2029.

Reacting to Duterte’s populist vow to increase SSS pension benefits by P2,000 a month, the Foundation for Economic Freedom (FEF) appealed to the incoming administration to observe fiscal prudence and specify the source of funds before executing such an increase.

FEF said outgoing President Aquino had vetoed the proposed measure, taking into account that it would cost SSS P56 billion annually versus the annual investment income of P30 billion to P40 billion only, therefore yielding a deficit of P16 billion to P26 billion annually.

The economists warned that such measure would only hasten the depletion of the SSS fund life by 13 years to as early as 2029, when many of the current contributors will be retiring.

“The increase in pension benefits will deplete SSS funds because most of the people who will benefit from the large increase in pension payments will receive much more from SSS than they have contributed before they retired. It is therefore prudent that how the large increase in retirement benefits will be paid for be decided now (such as via new taxes or higher SSS contributions from currently working SSS members) and not many years from now, as the advocates of the increased benefits have irresponsibly proposed,” FEF said.

FEF is chaired by former Finance Secretary Roberto de Ocampo.

“We recommend that any major increase in pension should only be considered in the context of a thorough review of the entire Philippine pension system to improve its structure and governance for a more adequate, affordable, sustainable and robust system,” said the FEF, an organization advocating market-friendly reforms and  good governance.

The Philippine pension system includes the SSS, Government Services Insurance System (GSIS), Home Development Mutual Fund or PAG-IBIG, military pensions paid from the budget and private tax-exempt retirement accounts.

“We are in agreement with independent observations on the issues affecting the solvency of the Philippine pension system,” the FEF said in a recent statement.