SSS presents 6 options to implement P2,000 pension hike

The Social Security System (SSS) is proposing six options on how to implement the proposed P2,000 across-the-board increase in the monthly pension of retirees without overwhelming the coffers of the pension fund for private sector employees.

In a press conference on Friday, Social Security Commission Chairman Amado Valdez announced six options on how the monthly pension can be increased.

"Implementing the P2,000 increase would require an additional P56 billion in the first year alone to fund the 12 monthly pensions and 13th month pensions of more than two million SSS pensioners," Valdez noted.

SSS pension releases have been growing at an average rate of 8 percent a year in the last five years, the pension fund said.

"From 1980 to 2002, SSS pension increase of up to 20 percent were implemented a total of 19 times, sometimes even twice within the same year, while the contribution rate remained pegged at 8.4 percent for the same 23-year period which shortened the life of the fund," Valdez noted, cautioning against repeating the mistakes from the past.

"That's why we are trying to give it in installments or staggered basis," Valdez said.

The SSS official noted the first option will be implemented in installments over four years.

"This option provides a P500 increase for all pensioners in four consecutive years starting 2017 until the P2,000 is provided by 2020," Valdez said.

At this rate, the life of the fund is expected to last until 2027, according to the SSS.

Short-term solution

The SSS is a defined benefit system with the current fund obligated to present  members that are entitled to six types of benefits based on qualifying conditions, it said a statement.

"Widening the base for contribution collection is a short-term solution, but the fund will eventually dry up by 2025 because, right now, the return on every peso contribution is P16 on average," Valdez claimed.

In the second option, the increase is implemented yearly based on five age groups and   with first tranche covering the oldest pensioners.

"'Yung new retirees they have enough savings unlike the older ones. That's why we want them to receive the increased pension first," Valdez said.

The first group will receive the P2,000 increase in 2017, the second in 2018, and so on down the line. This option is estimated to keep the fund going until 2025.

The third option is similar to the second option, except the increase for the second bath will happen not in 2018 but in 2019.

In the fourth option, a retiree may leave his or her P2,000 increase with the SSS. Like a provident fund, the additional pension will earn interest and may be withdrawn after five years. This option may be voluntary or compulsory.

Repercussions

In the fifth option, the pensioner will be segregated into five groups based on the amount of the monthly pension they are receiving and will be implemented also on a yearly basis.

The principle is same as the second option, with those getting the least amount of pension getting the tranche of increase.

The sixth option is similar to the fifth option, however, the pension increase would only be P1,000.

The fund life under the fifth and sixth options are still under study.

Valdez believes that lawmakers are also aware of the repercussions of steep benefit increases without the corresponding source of revenue, which in the past had reduced SSS fund life to as short as 16 years based on the 1999 actuarial valuation. — VDS, GMA News