I HAD a chance to ask several young professionals, most of them single, if saving a portion of their monthly income is a habit for them. I was surprised to learn that the majority of them were investing in mutual funds, which, they said, is the safest way to earn from their savings for retirement.
This is welcome news, considering that a recent survey by Sun Life of Canada (Philippines) and Social Weather Stations showed that only 32 percent of Filipinos actually have a saving habit. It seems that many of us live in the now and allow the future to decide for itself.
Perhaps, the only social protection we are all familiar with is that offered by the Social Security System (SSS). However, we often complain about the meager pension from the SSS, mainly due to the limitations of its defined benefit system, where the pension is based on contributions and the credited years of service. Many are clamoring for ways to augment the current benefits received from the regular SSS program.
In response, here comes the SSS Personal Equity and Savings Option (PESO) Fund, a local provident fund that aims to provide a more comprehensive retirement-protection system on top of the regular SSS retirement program. With the SSS PESO Fund, members now have the option to contribute more to the pension fund, thereby stepping up their long-term financial planning.
All private-sector employees, self-employed (SE), voluntary members (VM) and overseas Filipino workers (OFWs) who are not yet 55 years old and have not filed any final claim under the regular SSS program may enroll in the SSS PESO Fund. For SE, voluntary and OFW members, they must be paying the monthly salary credit for at least six consecutive months for the last 12 months immediately prior to the month of enrollment.
Not to compete with private insurance companies, each SSS PESO Fund member is only allowed a maximum contribution of P100,000 per year and a minimum of P1,000 per payment.
As one of the giant pension funds, the SSS is a prime mover in the stock market and its officials said the SSS PESO Fund will be placed in sovereign guaranteed investments. A member’s contribution is allocated in three accounts: retirement or total disability is 65 percent; medical is 25 percent; and general purpose, like education, housing, livelihood and unemployment, is 10 percent.
The good thing about the SSS PESO Fund is that it is tax-free and has guaranteed earnings. For instance, earnings for the retirement or total disability account is based on the five-year Treasury bond, while earnings for medical and general-purpose accounts are based on the 364-day T-bill rates.
Withdrawals of contributions in the SSS PESO Fund are allowed, but corresponding penalties and operating charges are imposed, depending on the number of years the contributions are retained in the fund. I think this clause had to be included to discourage members from withdrawing their money in the provident fund, given that its main goal is to save money for retirement.
SSS PESO Fund members have the option to receive their retirement or total disability benefit either through a monthly pension, lump sum or a combination of both. The death benefit for survivors of SSS PESO Fund members will be paid in lump sum. In case the SSS PESO Fund member dies prior to the expiration of the pension period, his or her survivors will be paid the remaining balance of his or her fund in lump sum.
In our society, extended families provide for the elderly. But widely dispersed families and longer life expectancies have made maintaining this extended safety net difficult. The SSS PESO Fund is a way to catch up with these challenges in preparing for retirement.
For more information about this topic, call the SSS’s 24-hour hotlines at (632) 920-6446 to 55, Monday to Friday; e-mail member_relations@sss.gov.ph; or visit our website at www.sss.gov.ph.
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Susie G. Bugante is the vice president for public affairs and special events of the Social Security System, where she has worked for more than two decades handling the agency’s public-information and public-relations activities. Send feedback about this column to susiebugante.bmirror@gmail.com.