The net income of the state-run pension fund Social Security System further fell 12.5 percent year-on-year to P3.5 billion in the first quarter as expenditures continued to increase due to the pension hike while investment income declined following a drop in the stock market.
The decline in net income from P4 billion in the first quarter of last year was nonetheless slower compared to the 67 percent slide a year ago.
The latest SSS data showed that total revenues from January to March inched up 1.9 percent to P49.72 billion from P48.78 billion in the same three-month period last year mainly as the pension fund collected more from members.
Contributions
End-March contributions rose 7.6 percent to P42.57 billion from a year ago’s P39.55 billion.
In a statement Friday, SSS president and chief executive Emmanuel F. Dooc attributed the increase in collections to “aggressive collection drives such as posting of show cause orders in non-compliant establishments, serving of warrants of arrest together with the Philippine National Police, and the implementation of the real-time posting of contributions (RTPC) as a new form of collection system.”
“There was a large volume of paying members in the first quarter of this year, majority of them voluntary members, combined with the implementation of the RTPC since January which caused the immediate posting of collections in our system,” Dooc explained.
Investment drop
However, first-quarter investment and other income dropped 22.5 percent to P7.16 billion from P9.23 billion last year.
“The SSS’s investment and other income slid in the first quarter due to several factors such as the the unfavorable mark-to-market valuation and timing of receipt of dividend income,” Dooc said.
“The Philippine Stock Exchange index (PSEi) opened at 8,584 in the beginning of the first quarter and closed at 8,039 by end-March. This represented a 7.04-percent drop or 604 points, which affected not only the SSS but also other investors. Also, the SSS’s dividend income from invested companies for the period of January to March declined by 9.61 percent to P1.27 billion compared to the P1.41 billion in the same period last year,” Dooc noted.
“Our investment in government securities, which comprises majority of our investment power, performed well but was tapered by the fair value loss on government bonds,” he added.
As for other income sources, Dooc also noted that “payments for member loans were lower in the first quarter of the year because there was no Loan Restructuring Program offering during the period” unlike last year.
Also, “the SSS had no programmed Education Assistance Loan Program counterpart funding in first quarter of 2018,” he said.
Expenditures
On the other hand, total expenditures rose by a faster 3.2 percent to P46.22 billion as of March from last year’s P44.78 billion.
Benefit payments, which include payouts to pensioners, death benefits, maternity benefits, disability benefits, funeral grants and sickness benefits, climbed 3.9 percent to P44.24 billion from P42.6 billion a year ago.
Payments for retirees’ pension comprised the bulk of benefits disbursed in the first three months, amounting P25.46 billion, SSS data showed.
First-quarter operating expenses were nevertheless reduced by 9.2 percent to P1.98 billion from P2.18 billion last year, which the SSS attributed to a “41.3-percent drop in maintenance costs and other operating expenses … due to the hiring of temporary personnel.”
Financial stability
Despite the further decline in net income, Dooc said that the SSS remained “financially stable and well-managed.”
“The total investments of the pension fund, representing 91.4 percent of the total assets, went up by P4.94 billion due to placements in treasury bonds, time deposits, equities investments, and new salary loans releases totaling P5.16 billion. The increases were slightly tapered by the decline in housing loans, corporate notes and bonds due to maturities,” he said.
“I am hoping that the positive performance of the agency, especially in increasing its collection, will continue until the end of the year. More so, we have relaunched the Loan Restructuring Program last April. So this will surely hasten collections from past due salary loans. Strengthened collection efforts will lead to higher collections. I am confident that the SSS will have enough funds to pay for current benefits and privileges of our members and pensioners,” he added.
Targets
In May, Dooc told reporters that they target to generate P50 billion from investment activities, which include disposition of idle assets.
Higher investment income, coupled with the proposed contribution rate hike, are expected to raise revenues to augment ballooning disbursements for pension benefits.
Last year, the SSS disbursed an additional P33.5 billion to pensioners following President Duterte’s approval of an initial P1,000 increase in monthly pension.
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’s fund life was already slashed by 10 years to 2032 from 2042 previously when the additional P1,000 a month were granted to pensioners.
Pension hike
Dooc had warned that implementing the second tranche of pension hike next year, as promised by Mr. Duterte, will further slash the fund’s life to only until 2026.
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.
Dooc had said that the SSS would have to shell out an additional P2.5 billion a month once the pension increase was brought up to P2,000 per month beginning 2019.
The increase in contribution rate can be implemented either through an executive order from the President, or by the proposed amendment in the Social Security Act of 1997 currently pending in Congress that will allow the Social Security Commission to jack it up even without presidential approval.