VALUE for money is often defined as utility derived for every sum of money spent. Every financially savvy person would often look at the value for money every time he or she spends and this would probably explain why mall sales often get mobbed by bargain hunters. That is well and good. But have you thought of value for money that is saved? Or is there such a thing?
Consider your Social Security System (SSS) contributions as savings for your retirement. At present, the maximum salary subject to social security contributions is P16,000. Even if you are earning way beyond this amount, you and your employer will only contribute a total of 11 percent of P16,000 or P1,760 a month of which your share is P580.80 (3.63 percent) and your employer’s is P1,179.20 (7.37 percent). If you are a self-employed person earning P16,000 a month or more, then you pay the entire P1,760.
Assuming that you contribute the maximum amount for the next 20 years before retirement, you would have contributed a total of P422,400. How much pension will you get?
Under the social-security law, the following pension formulas shall be used and the one that gives the highest result shall be applied in determining the pension amount of the member-pensioner: 1) The sum of P300 plus 20 percent of the average monthly salary credit (AMSC) plus 2 percent of the AMSC for each credited year of service (CYS) in excess of 10 years; 2) 40 percent of the AMSC; 3) P1,200, if the CYS is at least 10, but less than 20 years or P2,400, if the CYS is 20 or more years. In the example above, the first formula gives the highest result of P6,700.
Assuming again that you receive this amount for the next 20 years, including the yearly 13th-month pension, you can expect to get P1,742,000. If you are survived by your spouse, 100 percent of your pension is transferred to your spouse until his or her lifetime or until he or she remarries. That’s more than four times your total contribution! Even greater value for money if you only count your share.
What about someone who contributes based on a salary of P1,000? (Yes, Virginia, there are many who declare P1,000 as their monthly salary!) At 11 percent contribution rate this means P110 a month contribution. Assuming that the member contributes for 10 years, he would have paid a total of P13,200. When he or she retires, the minimum pension of P1,200 would be given him or her; and for the next 10 years, he or she would have received a total of P156,000, including the yearly 13th-month pension. That would be about 12 times more than what was contributed! Again, the pension crosses over to the spouse when the pensioner passes on.
Truly, as a forced savings scheme, your SSS contributions give value for money. Aside from your pensions, you also get to enjoy short-term benefits, such as sickness and maternity, while actively contributing.
Now as to the adequacy of benefits, that is a more complex matter that is a challenge to policy-makers, social-security administrators, as well as SSS stakeholders. In order to implement meaningful social security reforms, everyone concerned has to contribute.
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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.