THE Social Security System (SSS) has expressed support for lawmakers in addressing the need for meaningful pension reforms to ensure the long-term sustainability of the pension fund.
Newly-appointed Social Security Commission Chairman Amado D. Valdez, former dean of the University of the East College of Law, said that SSS management is supportive of a sustainable pension increase anchored on viable funding support mechanisms being threshed out in the House of Representatives (HoR) and the Senate in consultation with the SSS actuarial experts.
“We understand the need for higher SSS pensions. However, merely mandating to grant an across-the-board pension increase without any mention of how exactly the system will sustain it over the long term may not suffice,” Valdez said.
Lawmakers are studying a total of 13 different bills currently filed in the HoR and another six bills in the Senate. The bills offered no source of funding to sustain the additional benefits which amount to billions of pesos every month.
“SSS is a defined-benefit system so the current fund is obligated to its present members who are entitled to six types of benefits based on qualifying conditions. Widening the base for contribution collection is a short-term solution but the fund will eventually dry up by 2025 because right now, the return of every peso contribution is P16 on the average,” Valdez said.
Implementing the P2,000 pension increase, for instance, would require an additional P56 billion on the first year alone to fund the 12 monthly pensions and 13th month pensions of more than two million SSS pensioners. SSS pension release grew at an average rate of eight percent annually for the last five years.
Based on results of actuarial studies presented during legislative meetings, SSS recommended the corresponding increase in contribution rate, government subsidy or a combination of both as options for funding the pension increase.
Unlike the Government Service Insurance System (GSIS) which applies its 21 percent contribution rate on the entire income of public sector employees every month, SSS implements a much lower 11 percent contribution rate that covers a maximum monthly income of only P16,000.