COA flags SSS P40-B 'paper loss' in equity investments

State auditors have flagged the nearly P40-billion in unrealized equity investment losses incurred by private sector workers’ pension fund Social Security System (SSS).

In its 2025 annual audit report on the SSS, the Commission on Audit (COA) said the pension fund recorded a surge in unrealized equity losses on financial assets to P39.994 billion from P11.6 billion in 2021, “attributed to a lack of formal stop-loss thresholds necessary to trigger corrective actions and protect the Investment Reserve Fund (IRF).”

“Despite the adoption of SSC Resolution No. 553-s.2022 and International Social Security Association-aligned frameworks, the SSS recorded a 245% surge in unrealized fair value through other comprehensive income equity losses,” state auditors said.

The “paper loss” amounting to nearly P40 billion also “represents a substantial 32.93% reduction of the original acquisition cost amounting to P121.467 billion.”

Nonetheless, the SSS equity portfolio generated dividend income and realized gains totaling P30.132 billion from 2018 to 2025.

'Price fluctuations'

In its reply to COA, the SSS said that P39.994 billion in unrealized loss is a “non-cash, market-driven accounting adjustment reflecting temporary price fluctuations, not mismanagement or policy deviation.”

In a separate statement, the pension fund assured its members, pensioners, and the public that their contributions “are managed with care to protect the pension fund and ensure the continued payment of benefits.”

“A paper loss is an unrealized decline in the market value of an investment that has not yet been sold. No cash is actually lost unless the asset is sold below its purchase price,” the SSS said.

“It does not mean members’ contributions have been used or that pensions are at risk; market prices may recover over time,” it added.

The pension fund further said that it invests only in companies with strong earnings track records and stable business performance and does not place members’ money in risky or speculative investments.

“Its portfolio is diversified across different asset types, helping reduce risk as gains in some investments can offset declines in others,” it said.

“While stock prices may fluctuate, SSS continues to receive dividend income from its equity holdings, adding an estimated P9 billion to its net income annually. Dividends are part of the earnings distributed to stockholders,” it added.

The SSS also said its strong financial performance has enabled higher benefit payouts.

“From January to June 2026, benefit payouts rose 19% to P173.45 billion from P145.73 billion in the same period in 2025,” the pension fund said.

“SSS also implemented the second tranche of the Pension Reform Program, releasing P7.4 billion in additional pension benefits to 4.1 million pensioners to help them cope with inflation and higher energy costs,” it said.

The pension fund, moreover, said it regularly reviews its investment strategy and strictly complies with the Social Security Act of 2018 and its internal policies to safeguard the pension fund. —VAL, GMA News