SSS contribution rate raised to 10.4%

BY BERNARDETTE S. STO. DOMINGO, Reporter/BusinessWorld Private sector employers and self-employed individuals will start paying a higher Social Security System (SSS) contribution rate by early next year as a result of a one percentage point rate hike aimed at increasing the actuarial life of the state pension fund. SSS President and Chief Executive Officer Corazon S. De La Paz told reporters she had obtained President Gloria Macapagal-Arroyo’s nod to pursue the rate increase. The move will effectively push the SSS contribution rate to 10.4% from 9.4% for every P1,000 monthly pension and help extend its fund life for another 10 years. "The hike will come from employers, self-employed and voluntary workers. This is what’s needed. Hopefully they will get more benefits. Also, it will help increase our fund life," she said at the sidelines of an investment conference in Makati. Ms. De La Paz said affected members would have to shell out an additional P10 in their monthly contributions starting Jan. 1. The outlook for the fund’s actuarial life five years ago was only until 2015, but the latest actuarial valuation report showed an additional 16 years, extending its fund life to 2031. The longer life was brought by cost-cutting measures that had cut contribution deficit, allowing the SSS to post a surplus of P1.3 billion in 2005. Ms. De La Paz noted that ideally, a 12.5% contribution rate should increase fund life to near perpetuity. "Our actuarial life is not safe. We wanted a buffer (if something happens to the stock market," the official said. As of June, there were 26.5 million individuals registered with the pension fund. Of the total, 79% are private sector employees while the rest are self-employed or voluntary workers. There are around 774,000 employers registered with the SSS. SSS contributions grew at an average of 10% annually to P47.6 billion in 2005 from P31.4 billion in 2001. Its consolidated assets as of June stood P212 billion, and these are expected to increase by yearend, Ms. De La Paz said. As this developed, the SSS chief said she was still waiting for the Supreme Court’s (SC) go signal to sell the pension fund’s share in a merged Banco de Oro-Equitable PCI Bank (BDO-EPCI). The two banks’ merger, announced early this week, will create the country’s second largest bank in terms of assets. "I have to study it first. If the SC says we’re free to transact [business with BDO], then we will honor our commitment. If SC does not decide in two years, then there’s no agreement," Ms. De la Paz said. "We can either hang on to our shares or look for other ways to dispose them by investing in the foreign market, for example," she added. Official merger documents showed the share of SSS in the merged entity will be cut to 14.9%. The pension fund owns 25.84% of EPCI, which it has committed to sell to mall magnate Henry Sy’s SM group, which controls BDO. The sale will only go ahead once the high court decides on a pending case involving SSS’ sale of portfolio investments. The merger is targeted for completion in the first quarter of 2007.