SSS says fee hike in January to prolong pension fund life, raise future benefits | Inquirer Business
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SSS says fee hike in January to prolong pension fund life, raise future benefits

By: - Reporter / @bendeveraINQ
/ 07:03 PM December 23, 2020

MANILA, Philippines—The top management of the state-run Social Security System (SSS) on Wednesday (Dec. 23) said pushing through with the scheduled increase in private sector employees’ fees to 13 percent next year would not only prolong pension funds but also raise future benefits for members and pensioners.

The SSS, however, shunned calls to give away another P1,000 per month in additional pension benefits—a campaign promise of President Rodrigo Duterte—during the pandemic as it was also struggling as a result of an extended quarantine that led to thousands of businesses being shuttered and millions of Filipinos jobless.

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SSS president and chief executive Aurora C. Ignacio told a press briefing that the additional 1-percentage point in contribution rate, which would take effect in January 2021, will be evenly split between employers and employees, with employers paying 8.5 percent and employees 4.5 percent of salaries.

At the current contribution rate of 12 percent, employers pay 8 percent, while employees, 4 percent.

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Republic Act (RA) No. 11199 or the Social Security Act of 2018 signed by Duterte in 2019 allowed the Social Security Commission (SSC) — the SSS’s highest governing body — to raise contribution rate by 1 percentage point (ppt) every other year starting 2019 until it reaches 15 percent.

Previously, only the President can approve contribution rate adjustments.

The contribution rate hike to 12 percent (from 11 percent previously) which took effect last year will be followed by increases to 13 percent in 2021, 14 percent in 2023, and 15 percent in 2025.

The SSS had to lobby for legislation amending its charter and allowing the SSC to hike the contribution rate after its fund life was slashed by 10 years to 2032 when pensions were raised by P1,000 per month starting in 2017. Duterte had promised a total of P2,000 per month in pension raise.

The SSS’s fund life currently would last until 2054, according to SSS chief actuary Edgar B. Cruz. This prompted the SSS to look for ways to extend it to perpetuity to support all members and pensioners.

In light of this, Cruz said fulfilling the other half of Duterte’s promise at this time would be a “step in the wrong direction” as it would slash fund life by 10 years.

It means that another increase in pensioners’ monthly benefits would leave the SSS with no more money to give away by 2044.

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Since another round of pension hike would inflict “a very significant adverse financial impact” on the SSS, Cruz said it would be “very dangerous” to do so. “The future generations will suffer,” he warned.

Ignacio said while the SSS understood the plight of pensioners, the pension fund needed to maintain its actuarial soundness and was looking for additional fund sources to complete Duterte’s promise later on.

Finance Secretary Carlos G. Dominguez III, who chairs the SSC, said in a statement that “upon full implementation in 2025, the reforms under the Social Security Act of 2018 will offset the adverse financial impact of the P1,000-pension increase granted in 2017.”

He said SSS members should “see their higher monthly contributions as their savings and safety net against the future hazards of sickness, maternity, disability, unemployment, old age, death and other contingencies resulting to loss of income or financial burden for them and their beneficiaries.”

“Any drop in collections may lead to cash flow and liquidity issues,” said Dominguez.

“This could endanger the SSS’s ability to provide its members and their beneficiaries with benefits and loan privileges,” Dominguez added.

He said members’ investments were “well-managed and has allowed the pension fund to respond to the needs of members despite the drop in collections during the pandemic.”

The pandemic prompted the SSS to delay collections from an already dwindling number of members while continuing to lend to those reeling from the recession induced by the pandemic. As a result, the SSS shed revenue and saw its net income drop by 8 percent to P28.6 billion as of end-September.

“The SSS expects to further improve its financial performance and have better collections in the years ahead as the economy recovers from the coronavirus pandemic and regains its pre-COVID growth momentum,” Dominguez said.

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TAGS: Business, contributions, Dominguez, economy, increase, members, pandemic, pension fund, pensioners, SSS
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