• Challenges in implementing our social security pension programs



    Social security is a fundamental human right and is significant for economically and socially sustainable direction toward development. The ILO report of 2010-2011 stipulates that social security “covers all measures providing benefits, whether in cash or in kind, to secure protection, inter alia, from: (a) lack of work-related income or insufficient income caused by sickness, disability, maternity, employment injury, unemployment, old age, or death of a family member; (b) lack of access or unaffordable access to health care; (c) insufficient family support, particularly for children and adult dependents; and (d) general poverty and social exclusion. Thus, social security has dual functions, which are income security and availability of medical care.

    Access to social security is a public responsibility and is typically provided by public institutions, financed either from contributions or taxes. In our country, the Social Security System covers all private sector employees, own-account workers and other groups like informal workers and OFWs. The Government Service Insurance System, on the other hand, covers all public sector employees. SSS and GSIS schemes are financed by contributions from employers (who share the majority portion) and employees, but own account workers pay the combined percentage contributions charged to employers and employees.

    In the past decades of implementing the social security programs, there seems to be a non-alignment between policymaker and public opinions as regards the necessity of the emerging broader role for social security systems and the need to reform social security systems to cover all peoples and address poverty.

    There are many challenges that are being encountered in the implementation of the SSS and GSIS pensions in the Philippines according to the report (2011) of Mesa-Lago, Viajar, and Castillo. First, social security schemes are highly segmented since there are 15 separate schemes, like the SSS, GSIS, PNP, Firemen, Veterans, Coast Guards, etc. for the private sector workers and various segments of government workers. Each scheme has its own laws, administration and finances. Second, there is very low coverage of economically active population and elderly (60 years old and above). This can be attributed to the large informal sector and high poverty incidence in the Philippines.

    Third, there are generous entitlement conditions/benefits of the various schemes, but declining real pension. Fourth, there are significant elements against social solidarity and gender equity. Fifth, there are inefficiencies, high administrative costs, and poor social representation. Lastly, there is poor portfolio diversification due to concentration on government debt and loans (housing, personal, education, calamity) low share in equities, and lack of foreign instruments. For example, the SSS amnesties do not seem to get very good results and condone penalties on delinquent employers without subsequent evaluation.

    Obviously, there are needed reforms to address these challenges, which the various stakeholders like the government, employers, and trade unions can consider. There are some major suggestions that the report cited. One, integrate, harmonize and standardize the various segmented schemes to reduce substantial differences in entitlements/ benefits and administration. Two, consider SSS’ and GSIS’ actuarial valuations through setting ROI in real terms based on alternative inflation scenarios.

    Three, eliminate the salary ceiling in SSS similar to GSIS. Four, eliminate regressive subsidies on higher education, housing, and other goods/services that favor middle- and high-income groups, and shift saved resources to help the poor. Last, launch educational campaign or public outreach to explain the importance of compliance by members, and how it affects the pension schemes and the society.

    The concerted effort to reform our present various social security systems will lead to an integrated, extended actual coverage, sustainable, and poverty alleviating programs that will benefit many people from various sectors of our society.

    Dr. Divina M. Edralin is a full professor at the Management and Organization Department of the Ramon V. Del Rosario College of Business of De La Salle University.

    She is also the Vice Dean for Research and Graduate Studies of the college. The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty, and its administrators.


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