These days, the Social Security System (SSS) has been in the limelight mainly due to the ongoing media discussions on a possible contribution hike. As expected, there are groups who oppose this, saying that it is an additional cost or burden to employers and employees.
From my standpoint, there is one missing argument in the debate on increasing SSS contribution—that by increasing your savings with SSS, you are also increasing the amount of benefits that you will enjoy.
Building up one’s retirement and emergency fund, after all, starts when one becomes part of the labor force. In fact, the relationship between the SSS and a salaried worker is made stronger every time he receives his pay slip with his contribution to his own pension fund. I stressed on his own retirement fund because that is how the SSS works. The contribution you put in largely determines the amount of benefits you receive, whether for short- or long-term needs.
So, whatever the circumstances or age one is in, saving for the future should ideally be a major priority, and this is where the SSS comes in. Workers covered by the SSS benefit from a safe and secure means to financially prepare for their retirement, as well as other contingencies such as sickness, maternity, disability and death. With the SSS, members can gradually add to their retirement or emergency funds and earn generous returns for what they contribute. At present, monthly SSS contributions range from P110 to P1,760, which is based on 11 percent of their reported earnings per month with the coverable income capped at P16,000.
If the coverable income or Monthly Salary Credit (MSC) is increased, benefit increases will also follow as mandated by the social security law. For example, based on the latest pension simulation by the SSS Actuarial and Risk Management Group, a member with an actual monthly salary of P30,000 at the time of his retirement with 45 credited years of service will have a basic monthly pension of P15,700, or only 52 percent of his last salary, under the current P16,000 MSC ceiling. This amount includes the first tranche of P1,000 pension increase and the average of last 60 months of contributions is P16,000.
But, if the MSC ceiling will be adjusted to P30,000 by 2022, his estimated monthly pension will be at P29,300, or about 98 percent of his last salary at retirement. This amount includes the first and second tranche of the P1,000 pension increase and the average of the last 60 months of contribution is P30,000.
Short-term benefits will also increase for those who will pay under a new maximum MSC. Sickness benefit amount per day, for instance, will increase from the current P480 to P900 by 2022 under a P30,000 MSC. Maternity benefits for those delivering through caesarian will receive P78,000 from the current P41,600, while normal childbirth will jump from P32,000 today to P60,000 by 2022 if the MSC will be increased to P30,000.
Payment of regular contributions may not be a worry among covered employees, since they have their respective employers to do it for them as mandated by law. However, self-employed workers and voluntary members are advised to motivate themselves to jump-start—or resurrect—their habit of saving for their future through an active SSS membership by paying their monthly contributions regularly. With these possible benefit increases, it is a must to save more with the SSS.
Truth is, the clamor for higher SSS savings came from mostly young professionals today who earn more than P16,000. The issue on low SSS pension last year was actually a wake-up call to many of our young millennials who are now more aware of their finances, having been bombarded with aggressive marketing of private insurance firms. They have come to realize that the SSS is still the most affordable savings investment destination.
Members’ contributions is considered as the lifeblood of the pension fund as they comprise the majority of SSS earnings. Benefit payouts are from members’ contributions. After benefits have been paid, excess amount is invested and placed in a reserve fund.
For the past two years, SSS collection has increased by about 10 percent. From P130.8 billion in 2015, collection increased to P142.5 billion. This year, estimated total collection would be P156 billion.
Increase in collection was made possible through several interventions, most remarkable was the Race Against Contribution Evaders (RACE), which includes posting of a show cause order in stores as a stern warning to employers that they are accountable if they fail to comply with their social security obligations. Delinquent employers are ordered to show cause within a nonextendible period of 15 days from posting, before the nearest SSS branch to explain why no legal actions should be taken against them.
Another component of RACE is the “Oplan Tokhang” against delinquent employers. Together with the Philippine National Police, the SSS takes part in the arrest of erring employers who have been convicted based on decisions of the Regional Trial Courts. Maximum sentence for non-compliance with social security law is up to 12 years, without probation.
As a result of these interventions, collection from delinquent employers has been increasing every year from P18.44 billion in 2016 to an estimated P20 billion by year-end.
SSS pension payments, in particular, attest to the generous rate of return for the amount members saved up as SSS contributions during their employment years. As example, let’s cite a female member who 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 a 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 average period for pension payments, she would continue to receive P1,200 for monthly pensions—13 times a year given the 13th-month pension—for 20 years. It is worthy of note that this excludes possible availment of other types of benefits, such as sickness and maternity.
Income from investments help fill in the imbalance between the contributions collected and benefits paid to members. 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. Abiding by best corporate practices, 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).
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. While contribution collections and investment income have remained strong, the 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.
Many of us are guilty of tolerating personal habits that are detrimental to our own well-being and even to the welfare of others, such as our loved ones. Among the possible areas for deep reflection and improvement is our personal list of priorities, which greatly influences our habits, as well as our daily and long-term decision-making. A clear reflection of where our priorities lie is how and where we spend our hard-earned money.
For many workers at the early stages of their employment years, such as the current millennial generation, starting a retirement nest egg ranks low in their list of priorities, perhaps, knowing that retiring is still several decades away and that they can just worry about it later in life. Building up one’s retirement and emergency fund can also be shelved in favor of more tempting options to spend one’s earnings, such as splurging for trendy clothes, high-tech gadgets and leisurely travel. There are also workers at the middle or latter stages of their working life who forgo saving up for retirement and future emergencies due to family obligations, such as paying for household expenses, children’s tuition and monthly rent or mortgage.
To make it easy for members, the SSS offers a diverse menu of payment options. Members can remit their contributions over-the-counter at SSS branches and through various SSS-accredited partners, including banks, Bayad Centers, SM Business Centers, authorized cooperatives and microfinance institutions, to name a few. Members can even make online payments, or use their “virtual wallets” for those duly enrolled in Globe GCash—the latest in the SSS’s expanding list of payment options.
For SSS members with higher incomes who have the capacity to save more, the SSS Personal Equity Savings Option (Peso) Fund allows them to remit additional funds for retirement and emergencies on top of their regular SSS monthly contributions. The Peso Fund offers guaranteed and tax-free earnings and can be tapped for contingencies and purposes, such as retirement, total disability, medical needs, education, housing, livelihood and unemployment. In a span of a few months since its nationwide launch in September 2015, the SSS Peso Fund already has attracted over 700 enrolled members who have saved up over P10 million to date.