MALACAÑANG’S veto of House Bill 5842, providing for the P2,000 pension increase for Social Security System (SSS) pensioners, has triggered intense discussions across the country on various aspects of SSS operations in recent weeks. We understand the disappointment felt by our pensioners who have been given the impression by some sectors that the P2,000 pension increase was already a done deal, even when the bill was still in the earlier stages of legislation.
The bill features a major flaw, as it merely sought to increase SSS pensions without a corresponding source of funding. This could lead to the depletion of SSS funds by 2027, from the current 26-year fund life of until 2042. Implementing the bill would risk the pension payments of current contributors, as well as present pensioners, given that members receive SSS pensions for an average of 20 years.
SSS investments have been cited as among the possible revenue sources to finance the P2,000 pension increase, which requires at least P56 billion per year. The pension-increase issue also sparked allegations that SSS has been “mismanaging” its investments, but these claims are easily quelled by data on SSS investment performance.
SSS revenues are generated from two sources, namely, contributions and investments. Contributions are often referred to as the lifeblood of the SSS, as they comprise the majority of SSS earnings. However, income from investments also play a critical role in maintaining the long-term sustainability of SSS. By investing the funds contributed by private- sector workers, they grow and build up the SSS asset base that currently stands at close to P440 billion.
SSS investment activities are guided by the principles of safety, good yield and liquidity, in line with the strict provisions of the Social Security Law. SSS maintains a diversified investment portfolio that includes placements in government securities (40 percent), equities (23 percent), salary loans (15 percent), bank deposits (6 percent), corporate bonds and notes (8 percent), real-estate properties (4 percent), and development and housing loans (3 percent).
Under the current administration, the return on investments (ROI) of SSS remained ahead of key benchmarks, amid volatility and uncertainties in the market. From 2010 to 2014, various SSS investment activities resulted in annual ROI of 8.7 percent to 10.8 percent, consistently showing a better performance over the same period as compared with the inflation rate (3 percent to 4.6 percent), 364-day Treasury bills (0.7 percent to 4.3 percent) and 10-year Treasury bonds (4 percent to 7.2 percent). Based on figures as of November 2015, SSS investment income, so far, has reached P26.9 billion, achieving 6.7-percent ROI.
Prudence dictates that strong earnings should result in greater savings, instead of bigger expenses, to achieve and maintain long-term sustainability that is critical for the SSS. Members can be assured that whenever the fund can afford benefit increases, the SSS will not hesitate to propose such increases in the same way it pursued the 5-percent across-the-board pension increase that took effect in June 2014, and the higher maximum funeral grant of P40,000, from the previous P20,000, starting in August 2015.
While contribution collections and investment income have remained strong, SSS, in its fiduciary role, abides by its responsibility to ensure that the fund has ample revenues and savings to fulfill its benefit obligations for generations of Filipino workers.
For more details on SSS programs, members can drop by the nearest SSS branch, visit the SSS web site (www.sss.gov.ph), or contact the SSS call center at 920-6446 to 55, which accepts calls from 7 a.m. on Mondays all the way to 7 a.m. on Saturdays.
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Susie G. Bugante is the vice president for public affairs and special events of the SSS. Send comments about this column to susiebugante.bmirror@gmail.com.