SSS: Pension hikes need funding sources
State-run Social Security System (SSS) maintained that the proposed increase in retirement pensions is possible as long there is a sustainable source of funding.
In a statement, George S. Ongkeko Jr., SSS chief actuary and senior vicepresident said they support the proposal to increase pensions, but it should include provisions on the additional sustainable source of funding.
Any proposal to raise the pensions without funding sources will just shorten SSS’ fund life, Ongkeko said.
“We are one with legislators in their desire to provide higher pensions for SSS pensioners. However, we also have to look after the welfare of other SSS members and ensure that the SSS fund life is intact,” Ongkeko said.
The proposed R2,000 pension increase would require about R56 billion for the first year of implementation. The SSS expects this required amount to rise as the number of pensioners grow every year.
SSS currently pays benefits to about two million pensioners who yearly receive 12 regular monthly pensions and the 13th month pension. Last year alone, SSS paid about R102 billion in pensions.
“Granting higher pensions without the parallel implementation of provisions on the source of funding can result in billions in annual net losses for the system, especially for proposals such as the R2,000 pension increase,” Ongkeko said.
The 2015 actuarial valuation shows that the contribution rate must be increased to at least 17 percent to implement the pension increase while maintaining the financial status of SSS.
At present, SSS funds are projected to last until 2042 but will be shortened to 2025 if the increase will be effected without the additional source of funds.
“We made computations for all the different legislative proposals on the across-the-board pension increase,” Ongkeko said.
“All of it, including those with proposed gradual or staggered pension increases, should have a corresponding increase in contribution or an additional and sustainable source of funding,” he added.
For instance, every R500 pension increase requires a 1.5 contribution rate increase equivalent to an average of R5 additional contribution every day.
Representative Prospero Pichay Jr. from 1st District of Surigao del Sur said that instead of
the contribution rate increase, he is looking at the government providing subsidy to SSS to cover for the huge pension hike being proposed.
“SSS contributions were money entrusted by the people to SSS, hence, the need to protect it. Pag nagsara ang SSS, maybe, the Congress will be blamed,” Pichay said.
“We are also amenable with the proposal of Congressman Pichay for government subsidy. We have always supported any benefit increase provided there is a sustainable source of funding,” said Ongkeko.
In his presentation during a recent meeting with lawmakers, Ongkeko showed actual cases of SSS pensioners who have received pension benefits that were 29 to 35 times of their SSS contribution.