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WITH parts of the pre-need sector in something of a
crisis (no thanks to the bureaucratic muddling of the Securities and
Exchange Commission, and not to mention the Insurance Commission
also casting a moist eye on the sector), a lawmaker has come up with
a suggestion that is so practical that one has to wonder why nobody
had ever thought of it before.
Cebu Rep. Eduardo Gullas is
pressing Congress to mandate both the Social Security System (SSS)
and the Government Service Insurance System (GSIS) to put up new
voluntary education trust funds for the children and other
dependents of its millions of members.
“We have to encourage SSS and
GSIS members to consciously save and grow their money today for the
future college schooling of their children,” said Gullas, who has
earned a reputation both inside and outside the House of
Representatives as an educator.
Once established, Gullas firmly
believes that the new trust funds will give more meaning to the
hopes and dreams of many Filipinos to be able to send their children
to college—a sound education being the most important asset that
any parent can bestow on their offspring
According to the Cebu solon, the
proposed education trust funds are expected to provide essentially
the same plans being offered by commercial pre-need providers.
However, Gullas said the SSS and
GSIS trust funds should be able to guarantee considerably higher
benefit payments, in return for smaller contributions, owing to the
tax-exempt status enjoyed by both pension funds.
“To begin with, all educational
plan policies sold by the SSS and GSIS will be totally exempt from
premium and value-added taxes. Apart from this, the pension funds
themselves do not pay corporate income taxes.”
“Thus, every peso put in by
members will go directly to the trust funds, unlike in private
pre-need firms, where only 40 centavos out of every peso
contribution goes to the trust fund, and the rest is spent to
subsidize the operations of pre-need firms, including fat agent
commissions”, he pointed out.
Under the new proposal the new
SSS and GSIS education trust funds would be strictly voluntary.
Those willing and able to pay the extra premiums may subscribe. SSS
and GSIS members, regardless of civil status, may contribute to the
education trust funds”.
He added: “The trust funds
address a specific future need—the need to send children to
college. Thus, once installed, we are counting on SSS and GSIS
members to invest in the funds in a big way.”
Gullas makes the case that most
Filipinos, including SSS and GSIS members, spend a substantial
amount of their income to support the college education of their
children.
Education plan sales by private
pre-need providers dropped by P150 million or four percent to P3.65
billion from January to November 2007, compared to P3.8 billion in
the same period in 2006, according to the Securities and Exchange
Commission.
With tuition fees rising an
average of 15 percent annually at private schools, a family now
needs at least P317,400 to pay for an entire four-year college
course, compared to only P30,000 in 1987, according to a study
commissioned by the Philippine Federation of Pre-Need Plan
Companies.
The financial difficulties of a
number of educational plan providers have marred the growth of the
country’s commercial pre-need industry.
Members of Congress have blamed
the financial issues faced by some pre-need companies on deficient
regulation, bad and anomalous investment decisions and a flawed
business model that resulted in grossly under-funded trust funds.
With this new proposal, the
burden of funding the educational needs of their children should be
greatly eased by many Filipino families.
Email: bizzfizz_98@yahoo.com
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