Implementing the second tranche of pension hike next year, as promised by President Rodrigo Duterte, will cut short the Social Security System’s fund life to only until 2026, the state-run pension fund’s president and chief executive Emmanuel F. Dooc said Wednesday.
It means that members and pensioners can still enjoy their benefits in the next seven years; after that, the SSS will no longer have funds to disburse benefits.
This was the reason why Dooc told reporters last week that the SSS wanted to delay the implementation of another P1,000 in additional monthly pension for retirees to 2020 instead of 2019.
In a statement, Dooc noted that the SSS’s fund life was already slashed by 10 years to 2032 from 2042 previously when an additional P1,000 a month were disbursed to pensioners starting last year.
To recall, President Duterte last year approved an initial P1,000 additional monthly pension benefit, with a second tranche of another P1,000 to be granted to pensioners beginning next year.
But after the approval of higher pension benefits for retirees, the SSS’s net income in 2017 slid 37 percent to P20.3 billion.
While the SSS’s revenues last year rose 15 percent to P200.5 billion, expenditures climbed by a faster 27 percent to P180.2 billion.
The jump in expenditures, which include operating expenses, came on the back of the additional P1,000 in monthly pension, which totaled P33.5 billion for the entire 2017.
As such, the SSS wanted to jack up members’ contribution rate to up to 14 percent within the year from the current 11 percent to compensate for the impact of the pension increase on its fund life during the past two years.
The SSS was unable to implement the planned 1.5-percentage point contribution rate increase as initially scheduled in May last year as it awaited passage of the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
The pension fund also sought to raises the minimum monthly salary credit to P4,000 from P1,000 at present, as well as the maximum cap to P20,000 from P16,000.
The increase in contribution rate can be effected either through an executive order (EO) from the President, or by the proposed amendment in the Social Security Act of 1997 currently pending in Congress.
The proposed amendments to the SSS charter included allowing the Social Security Commission to jack up contribution rates without presidential approval.
“The second tranche of the additional benefit could only be granted either through the issuance of an EO from Malacañang or the approval of the proposed bill that will amend the Social Security Charter. We do not have the power to give an additional P1,000 benefit by next year. The Social Security Commission does not have the power to adjust the contribution rate or amount of monthly pension, only the President of the Republic and Congress have the power to approve a pension increase,” Dooc said.
“Just like what I have said earlier, our goal here in the SSS is to see to it that we are able to release the second tranche of pension still within the term of President Duterte, which can be approved in 2022 during his last year in office,” he added.
Dooc noted that “the amount needed for the implementation of the second tranche of the pension increase will be slightly higher as the number of pensioners increase every year by an average of 100,000.”
Dooc earlier said that the SSS would have to shell out an additional P2.5 billion a month if the pension increase is jacked up to P2,000 per month starting 2019.
“To strongly support the implementation of the second tranche of pension increase, there should be approval of either an increase in contribution rate or adjustment in the minimum and maximum monthly salary credits in the SSS,” according to Dooc.
“The SSS could generate some P7 billion in the last quarter of 2018 should the proposal of 1.5-percent increase in contribution rate, adjustment of the minimum salary credit from P1,000 to P4,000, and maximum salary credit from P16,000 to P20,000 be implemented by October,” he said.
“The proposal to increase the contribution rate is vital for the pension fund, its pensioners and its current contributing members. This is important to support the viability of the pension fund and to assure our current members that the SSS will still be there in their times of contingencies,” Dooc added. /je