LAWMAKERS and officials of the Social Security System (SSS) on Monday said a P1,000 across-the-board pension hike is feasible but the pension fund said it can only be implemented if members’ contributions are increased.
Speaker Feliciano Belmonte Jr. said his source from the SSS admitted that a P500 across-the-board pension increase is possible but members will have to pay bigger dues.
“I was told that if they give P500 now, the SSS fund life will be reduced three to four years, but that [action]is doable. However, it will not solve the problem in the long term. I said, what if we make it P1,000? I was told that it can be done with increased contributions,” Belmonte added.
SSS President and CEO Emilio de Quiros said the agency can give a P500 or P1,000 pension increase.
“[It would be easy to grant] P500 or P1,000 [but there has to be]contribution increase. [If it is] P1,000, every member will have to contribute 22 percent additional,” he explained.
President Benigno Aquino 3rd last week vetoed a proposed P2,000 across-the-board pension hike.
Belmonte called on the Senate to act on the House-approved measure that gives the SSS the power to increase its premium payments so that the pension hike can be implemented as soon as possible.
“I will write the President, the SSS and the Senate to pass that second bill. The SSS told me that with P1,000 and the increased premium, they can manage it somehow,” the Speaker said.
But Cagayan de Oro City Rep. Rufus Rodriguez said a P1,000 SSS pension increase is feasible even without increasing the SSS premium payments
“If we make it P1,000, it can be covered by the SSS’ annual income because it would only need P28 billion. The SSS’ monthly income is P35 billion to P40 billion,” Rodriguez added.
“Once they are allowed a premium increase, they can afford the P2,000 hike. We still want the P2,000 increase for our pensioners,” he said.
House Deputy Minority Leader Neri Colmenares said the SSS should stop using the specter of bankruptcy as an excuse in not approving a P2,000 pension hike.
Colmenares recalled that the same warning was made by SSS in 1999 that its fund life would only last until 2015.
But in 2007, the SSS announced that it has increased its fund life to 23 years or until 2031, and just recently, the SSS said it has a fund life until 2042.
“SSS survived and grew despite a 15-year fund life in 1999 and now they make it look like the 13-year fund life of up to 2029 is the end of the world. They just don’t want to grant the increase. They are not going bankrupt in 2029,” Colmenares said in a statement.
“The SSS just wants the easy way out by increasing contribution without considering the already measly wages that workers receive,” he added.
SSS officials said even if the pension fund improved its collection, it would not be enough to fund a pension hike.
Commissioner Michael Victor Alimurung said 75 percent of 33 million members of the state-run agency do not have the ability to contribute every month.
He said the proposed increase will have consequences for the 2.15 million current pensioners and 31 million members, which means at least P56 billion would be needed to fund the additional P2,000 increase.
“Do we want to collect from people who do not have the ability to pay so that we can increase pensions from people who can pay? [The answer is not] collection efficiency. [Do we need to] improve collection efficiency? [Yes, in the] formal sector,” Alimurong added.
For every one peso contributed, members receive P15, which is 9 and a half percent annual return for 30 straight years.
“Giving an increase of P2,000 across the board will bankrupt SSS as early as 2027.The P2,000 increase will cost SSS P56 billion in the first year alone, increasing by 10 percent per year annually as more members retire. This will reduce our benefits,” Alimurung told reporters.
The increase in benefit payment would also lead to a projected net loss of P26 billion for 2016, instead of the projected net revenue of P41 billion for the same year.
By 2028, the annual net loss is projected at P130 billion.
De Quiros said to provide for its cash needs, the SSS would need to liquidate P47 billion to P51 billion in financial assets, leading to a P19 billion drop in investment income for 2016.
To maintain its fund life until 2042, the officials said SSS contribution rate should be increased from the current 11 percent to 15.8 percent.
Another option would be asking for government subsidy — P130 billion per year starting in 2028.
The officials said SSS is striving to achieve the ideal fund life of at least 70 years for the benefit of current as well as future pensioners.
Currently, contributing members have the right to receive their own share of pension by the time they retire.