SOCIAL Security System (SSS) contributions need to be hiked to 17 percent of a member’s salary to save the state-run pension fund from bankruptcy, once the proposed two-step, across-the-board increase of P2,000 in monthly pensions is implemented, the country’s economic managers have said.
In a statement over the weekend, the Department of Finance (DOF) disclosed that Finance Secretary Carlos Dominguez 3rd, Budget and Management Secretary Benjamin Diokno and Socioeconomic Planning Secretary Ernesto Pernia in a December 15 memorandum to President Rodrigo Duterte sought the adjustment in the contributions of employers, employees, self-employed individuals and volunteer members of SSS.
Without an accompanying “upward adjustment or restructuring of the contribution rate,” the proposed pension hike would jack up the unfunded liabilities of the SSS from P3.5 trillion to P5.9 trillion, they warned.
If approved, the pension hike proposed by Congress “may adversely affect the Republic’s credit rating,” said the three Cabinet secretaries, and the “SSS would be bankrupt and left with no funds for other members in the future.”
Although the government is ready to keep the pension fund viable by way of a subsidy in case the SSS finds itself in dire financial straits, the secretaries stressed that this should merely be a “last resort,” because it remains the primary responsibility of member-employees and their employers to keep the fund afloat.
They pointed out in their joint memorandum that “the public must not be made to carry the burden of the increase which benefits only privately employed individuals.”
Without a corresponding increase in member contributions, they said the congressional proposal to hike pensions would cut the actuarial life of the fund by 14 to 17 years to 2025 to 2028, because the SSS will have to cough up an additional P32 billion annually to cover the initial P1,000 hike and P62 billion for the full P2,000 increase.
The Cabinet secretaries also said it was not unfair to ask for an increase as pensions have grown 22 times while the contribution rate has increased just three times since 1980.
The DOF noted that based on the House resolution proposing the P2,000 pension increase, there are at least 33 million members of the SSS and 2.2 million retirees receiving pensions.
The secretaries recommended to President Duterte an increase in the member contribution from the current 11 percent of salaries to 17 percent.
And to cushion the effect of the proposed adjustment in the monthly contribution of SSS members, the secretaries recommended to the President that the first tranche of the P2,000 monthly pension increase be moved back and carried out once Congress approves the first package of the Comprehensive Tax Reform Program, which provides for cuts in the income tax payments of low-income workers.
The SSS said it would introduce remedial measures, for instance by increasing the maximum ceiling of members’ contributions based on their salary to keep the fund liquid amid the pension hike.
“It will be a never-ending clamor for more benefits, so we really have to improve the fund level of the system. Next year, our projected contribution is at P155 billion yet the benefit paid because of this increase is P168 billion. The contribution is short so we have to earn more,” SSS President Emmanuel Dooc told reporters.