SSS pension raises must be funded

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Ma. Isabel Ongpin

Ma. Isabel Ongpin

ONE bit of good news is that President Duterte is listening to his economic managers. Particularly in the case of the raise in SSS pensions. He is trying to find a sensible and effective way that the pensions can be raised without ruining the Social Security System for its future pensioners.

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While it is quite true that the pensions need to be raised, they cannot be raised without providing for the future of the Social Security System and its future pensioners. This only means that funding must be provided for the Social Security System to absorb the added expense and continue its mission of providing the right pensions for its contributors in the long term.

Thus, the legislature did a shortcut insisting on raising pensions without providing the necessary safety net to keep the Social Security System viable. Another case of populist promises that have no underlying support to prevent them from collapsing at the end. Indeed, finally coming to a broken promise in the long term.

Admittedly, the Social Security System has not been all that efficient in collecting dues from employers in the past. Even if they suddenly were able to collect more or all that is due and they should, it could not endure the financial outlay that an across-the-board P2,000 increase would cause.

The point is that there is no free lunch. It has to be paid. Thus, it seems the only option is to raise the dues that contributors pay now to about 17 percent. This will cause a howl of populist outrage but it is the one way to pay the cost and the only way that the Social Security System can reach the future with intact service. Perhaps the win-win solution that the President is looking for lies in reducing the percentage for low salaries and raising it for higher salaries. Moreover, there is a tax reform bill being proposed that will lower income taxes for those with lower salaries. At least Social Security System members have regular jobs and monthly salaries which means they are better off than many of their countrymen. They also use public services and have social security benefits. Their contributions will be commensurate with their pensions and the services rendered in the long run. But if shortcuts are taken, there will be no long run.

Let us hope that the government’s communications office explains the above in simple terms to the general public and in particular to Social Security System members and pensioners. Nothing can be free without paying in some way—taxes, contributions, VAT, etc.—for a society to be viable and render the basic services, including pensions. A government that stands by this principle is a responsible and trustworthy one which will not gloss over what is necessary.

Maybe it is time for the government to stop the populist promises of free this and free that. It is hoped that the raises in salaries of soldiers and police and eventually teachers and government personnel are funded from sources that can manage them and not cause a budgetary deficit that will be the ruin of government operations and the general economy. I am sure the economic managers can manage the problem and let us hope the President and the Executive Department as well as the Legislature, which is crucial and needs to cooperate, will listen.

There are cautionary tales from all over the world on populist measures without safety nets, citizen discipline and demagogic directions. Please note present-day Venezuela.

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4 Comments

  1. on the sss website, one would find these under Publications/ Facts and Figures:

    https://www.sss.gov.ph/sss/DownloadContent?fileName=Facts%20Figure%20Sep%202016%20Rev2.pdf

    on the investment level portion on page 2, has the sss ever published the name of the various fund mangers/ traders managing/ handling these funds?

    the public deserves to know who are the people handling their contributions.

    in the website of the philippine stock exchange, for investor protection, all trading participants/ brokers are required to report hirings and resignations. this is then consolidated and posted on the website. with this, the investing public knows who are associated with the different brokers they transact with.

    but with the sss, who handles these funds?

    anonymity can be used as a perfect cover for under performance and ineptness.

  2. Does the SSS do their mandate in helping the retirees? The answer is NO. My proposal since SSS failed miserably in their mandate, let us ABOLISH the SSS. We are paying salaries and big bonuses on their employees without getting the main objective in helping the retirees.

  3. Before the SSS should ask the general public for more contributions, they should be open to have their operations and expenses examined. In a world of mostly electronic mail/fund transfers, do they really need 274 branches and offices. The entity has close to 35 Million contributors and only 1.5 Million retirees. 17% contribution seems excessive. For comparison’s sake let us look at the Wisconsin State retirement system. By all measures it is close to a 102% funding ratio. It has 256,000 contributing members and 154,000 retiree/no longer employed. The contribution rate is only 12.6%. If other retirement systems are clearly doing more with less, then the SSS should have it entire system reviewed based not only on it’s operating expenses but also how it manages it’s funds for investment. I think Juan de la Cruz is ending up paying more for a lot less benefits.

    • are you comparing now pesos philippine n us dollars wisconsin ??? you should take into consideration the exchange rate buying power of two different currencies