Shortly after his appointment as the new Social Security Commission chairman, Dean Amado D. Valdez expressed his strong support for granting the P2,000 across-the-board pension (ATBP) increase.
In a news briefing during Valdez’s first few days in office, he proposed different implementation strategies to make the P2,000 pension increase more feasible—granting an ATBP increase of either P500 annually in four years or P1,000 in 2017 and 2022; opening of provident-fund accounts, where pensioners can deposit the funds allocated for their additional benefits to earn interest in four years; or prioritizing those who would first receive the pension increase based on their age and economic standing.
The rising costs of living has made the clamor for higher pensions from the Social Security System (SSS) more persistent. However, the SSS can never disregard its obligation to ensure the long-term financial viability of the pension fund. The SSS knows that this situation necessitates a “win-win” solution that would satisfy the needs and concerns of the various parties concerned.
After in-depth discussions on the P2,000 pension increase among the top policy-makers within the SSS, Valdez and other SSS officials have presented in separate sessions with members of Congress and the Senate what the institution considers as the sought-after the win-win solution—granting the pension hike in two tranches, with the P1,000 ATBP increase in 2017 and another P1,000 in 2022 or earlier.
But why provide the additional P2,000 pension on a two-tranche basis? According to the SSS, immediately releasing the full P2,000 will require an extra P64 billion for the first year of implementation alone. Based on SSS actuarial projections, it would shorten SSS fund life from 2042 to 2025, and lead to billions in annual net losses if there are no specified funding sources, such as government subsidies.
With the initial grant of P1,000 eyed for next year, SSS fund life is projected to last until 2032. The maximum five-year “dormant” period, from 2017 to 2022, will enable the SSS to use the differential amount resulting from granting P1,000, instead of the P2,000, pension increase for investments, such as tollway projects and other infrastructure through public-private partnerships.
Under its current charter, the SSS can allot up to 30 percent of its investment-reserve fund on infrastructure projects, such as roads, bridges, ports, telecommunications and basic utilities, as long as these carry a government guarantee and ensure the SSS’s share in the earnings. The SSS is also exploring the possibility of seeking significant ownership in utility corporations, which offer the added advantage of giving SSS members greater representation in deliberations on electricity- and water-rate hikes.
These investments are intended to generate additional income for the SSS, making the institution more capable to afford higher pensions and benefits for its millions of members and beneficiaries. With the two-tranche implementation, the SSS stands a greater chance of successfully mitigating the financial impact of the pension increase and preserve the long-term viability of its funds.
Apart from its objectives to drive up revenues from investments and provide more meaningful benefits, the new SSS management also plans to focus on how to improve SSS operational efficiency, coverage and contribution collection. To better achieve these reforms, the SSS will need the support of the legislators, SSS members and other SSS stakeholders.
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To all my readers, my apologies for not being able to write my column in the past weeks due to medical reasons.
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 Monday all the way to 7 a.m. on Saturday.
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.
1 comment
All this is speculation and conjecture. “for investments, such as tollway projects and other infrastructure through public-private partnerships.” to be producing returns it will take 5-10 years and there is no guarantee that the yield will be sufficient to overcome the deficit and leave enough to be re-invested to keep the fund viable, as such projects historically have dividend yields of maximum 2-3%.