The plethora of savings and investment options can leave one’s head spinning, especially for those with little patience, mathematic prowess and financial know-how to differentiate which among the available instruments offer the safest havens for their funds, most optimized returns and best fit for their personal budgets, capabilities and needs.
Nevertheless, it doesn’t require financial acumen to understand the soundness of putting funds under the care of the Social Security System (SSS). These forced savings are in the form of monthly contributions currently based on 11 percent of the member’s monthly salary—or up to P16,000, which is the present monthly salary credit (MSC) ceiling.
SSS savings, which may be considered as investments for the future, are returned to the members and their beneficiaries in the form of benefits for covered contingencies, such as sickness, maternity, partial or total disability, retirement or old age and death. Three of these benefit programs—namely, for retirement, disability and death—offer lifetime pensions for qualified members and beneficiaries.
SSS critics scoff at the low level of the minimum SSS pension, which is pegged at P1,000. Pensions must also be paid for no less than an aggregate period of 60 months—or what is often referred to as the five-year guaranteed period—as provided by Section 12 of the Social Security Act of 1997.
The SSS charter further provides that the minimum pension is P1,200 per month for members with at least 10 credited years of service (CYS), and P2,400 for those with at least 20 CYS. This often applies to those applying for retirement pension, given that the law requires members to accumulate at least 120 contributions—which is equivalent to 10 CYS—to qualify for the said benefit.
There are three formulas provided by the SSS charter in determining one’s pension amount, and the
highest computed pension is what is paid to the eligible member or beneficiary. One of these formulas is the provision on minimum pensions.
Some sectors argue that the minimum pensions of P1,000 for disability or death, and P1,200 for retirement, are simply too little to pay for the pensioners’ needs, especially given the rising cost of living.
What they often fail to point out is that SSS pensions are not indexed against inflation rates, in the similar way that the law is silent on how to keep the amount of contributions in step with the actual growth in monthly income of members, particularly for high earners. These are major limitations set by law that stifle the SSS’s capacity to provide more meaningful pensions and other benefits.
Despite the low amount of contributions mandated from members, the SSS is able to provide a generous rate of return: approximately P6 up to P15 in benefits for every P1 contributed to the SSS. In fact, what underscores the value of the SSS as an ideal savings and investment vehicle—apart from the security provided by the government guarantee on benefits—is the substantial rate of return that the SSS offers on the contributions of members.
This is evident, even for those receiving the modest P1,200 minimum amount of retirement pension. For example, let’s say a female SSS member has paid the P110 minimum contribution over a span of 10 years or 120 months, for a total contribution of P13,200. Upon retirement, she would be entitled to the minimum pension of P1,200. It would only take her less than one year—or only 11 monthly pensions, to be exact—to recover the entire P13,200 that she had contributed to the SSS. Based on the 20-year average period for pension payments, she would continue to receive P1,200 for monthly pensions—13 times a year given the traditional 13th month pension—for two decades.
It is worthy of note that this excludes her possible availment of other types of benefits such as sickness and maternity, while her beneficiaries can also file for death pensions and funeral benefits, when the time comes.
Clearly, in the SSS, it is not merely a case of reaping what you sow, because members gain much more.
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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.
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.