MANILA – Social Security System (SSS) officials said on Wednesday they have listened to the clamor of employers and some business groups to defer the contribution hike in the state-run pension fund, but the scheduled increase in contribution rate is mandated by law.
“As much that the SSS would like to support the clamor of the public that the intended increase to be deferred, actually we are not going to do that because the basis for such increase is a legislative act,” SSS senior vice president and chief legal counsel Voltaire Agas said in a virtual press conference Wednesday.
Under the Social Service Act of 2018, the SSS shall implement contribution rate hike in 2019, 2021, and 2025.
SSS president and chief executive officer Aurora Ignacio announced in the same virtual event that the state-run pension fund will push through with the contribution rate increase from 12 percent to 13 percent starting January 2021.
Ignacio said the minimum monthly salary credit (MSC) will also increase from the current PHP2,000 to PHP3,000 starting next year, while also hiking maximum MSC from the current PHP20,000 to PHP25,000.
SSS chief actuary Edgar Cruz explained how the rate increase will impact on the members’ contribution to the SSS.
For members with MSC of PHP3,000, the monthly contribution will increase from PHP370 to PHP400 starting January 2021. For those with MSC of PHP10,000, it will increase from PHP1,210 to PHP1,310. For those with MSC of PHP20,000, contribution will hike from PHP2,430 to PHP2,630.
“The purpose of this mandated contribution rate increase was made by the legislature. Because as we all know in 2017, we had a PHP1,000 across the board pension benefit increase for our pensioners, and that benefit adjustment or increase was not funded. So it will put at risk the sustainability of the fund, such that this legislated increase. We’re just supposed to allow the SSS fund to be restored to where it was prior to grant of the 2017 increase,” Agas said.
He added that the coronavirus disease 2019 (Covid-19) pandemic has “taken heavy toll” on SSS cash flows due to decline in contribution collection and higher claims on unemployment insurance coupled with the expanded paternity benefits.
“Because of these, any delay of implementation — which is mandated by the law — will seriously endanger not only the fund, but equally important, in peril the SSS’ ability to provide prompt and much needed financial assistance for members during this pandemic,” the SSS executive said.
Cruz said per last valuation, the SSS fund life is projected to be 2054.
“The fund is expected to be depleted and we have to think ways to extend to perpetuity,” he said. “The SSS is there to provide for retirement security of all members, not just the current pensioners, but the current workers who are contributing and who will become future pensioners as well as even the generation yet unborn.”
The SSS also launched the Workers’ Investments and Savings Program (WISP), which will be rolled out by January 2021.
Those members with MSC exceeding PHP20,000 are automatically enrolled in WISP.
For instance, those with MSC of PHP25,000 are mandated to be included in the WISP. Their monthly contribution will also increase from the current PHP2,430 to PHP3,280 come next month.
Cruz said those with MSC exceeding PHP20,000 make up 20 percent of total SSS members.
Under the WISP, members are entitled to retirement, total disability, and death benefits in addition to the Regular SSS Program.
SSS will invest a significant contribution under WISP in risk-free government securities and a modest portion will be invested in equities in blue-chip corporate investments.
Earnings realized from investments will also be distributed proportionately based on members’ contributions. This means that the bigger the contribution, the higher the earnings that the member stands to receive.
To date, SSS projects that base return of investments of 4.5 percent and investment income under WISP is tax-free. (PNA)