The Social Security System (SSS) is all set to implement an increase in contributions from members and their employers, saying it has the blessing of business and labor groups.
The state-run pension fund for private-sector workers said it was just awaiting formal approval from President Aquino, who already made known his support for an increase in SSS contributions in his fourth State of the Nation Address (Sona) on Monday.
The President said an increase was needed to ensure the viability of the SSS fund, which he warned would be depleted 28 years from now if no adjustment was implemented.
Diana Pardo-Aguilar, an SSS commissioner, told the Inquirer that the pension fund would implement a 0.6-percent hike in contributions, which shall be equally shared by members and their employers. That is, 0.3 percent is to be shouldered by SSS members and the other 0.3 percent by their employers.
At present, contributions are set at 10.4 percent to 11 percent of salaries of employees. Workers pay 30 percent of the contributions, while employers carry the bigger share of 70 percent.
“We are happy the President mentioned his support [for the proposed hike in contributions] during the Sona,” Aguilar said.
Malacañang on Wednesday said that increasing a member’s contribution to the SSS was inevitable.
“These are bitter pills to swallow…. These are the things that we are asking everyone, or the public, or the citizens to bear with us because … at the end of the day, it will be the citizens who would be benefiting from this,” presidential spokesman Edwin Lacierda said at a briefing.
In recent consultations with various business and labor groups, the SSS got their consent for the 0.6-percent increase in monthly contributions, according to Aguilar.
“The proposed hike has been cleared with the technical working groups of Ecop (Employers Confederation of the Philippines), PCCI (Philippine Chamber of Commerce and Industry), joint foreign chambers of commerce and other business groups. It also has been cleared with labor groups, such as TUCP (Trade Union Congress of the Philippines),” the SSS official added.
‘Too many contributions’
But business groups on Wednesday asked the SSS to “exercise caution” before implementing a new round of increase in contributions from its members.
In a phone interview, Miguel B. Varela, chair of Ecop and president of the Philippine Chamber of Commerce and Industry, said they have not been consulted yet “for this new increase.”
“We will have to see and discuss it with SSS because you know, we cannot just [implement an] increase because it will have an impact on the cost of doing business,” Varela said.
He said the business sector was already struggling with the high cost of energy. “(A)nd here comes another cost… How will investors view this? There are too many ‘contributions’ already so caution is needed.”
Varela said the SSS move might prompt other agencies to seek an increase in their members and employers’ contributions.
Melito S. Salazar Jr., president of the Management Association of the Philippines, said the increase in contributions would be “met by the business sector with initial opposition.”
“Government must show that it has undertaken all moves to improve SSS fund management and operations streamlining, which could fund increased premiums and corresponding benefits,” Salazar said in a text message on Wednesday.
“Properly presented, the SSS plan will be supported given its pretty low percentage increase in contribution compared to the employees’ benefits,” he added.
The SSS expects Malacañang to approve the proposed increase very soon given Aquino’s recognition of the financial problems besetting the pension fund.
Aquino placed at P1.1 trillion the estimated unfunded liabilities of the SSS. He said the amount would grow by an average of 8 percent yearly unless SSS revenues increased.
Unfunded liabilities of a pension fund are obligations at a certain time in the future for which no funds have been set aside. In the case of the SSS, its existing fund would cover liabilities only until 2041, the President said.
Aquino said it was about time contributions to the SSS were increased. He noted that since the 1980s, contributions had increased only twice but pension benefits had risen 21 times.
He said that if 0.6 percent was added to the contribution rate, this would deduct P141 billion from the unfunded liability.
Invest in future now
“If we begin to invest in our future today, no further problems will be handed down to the next generation of Filipinos,” he said.
Once the 0.6-percent increase in contributions is implemented, the SSS is expected to push for additional increases in the future. If it would have its way, the SSS wanted several increases in contributions in small amounts over a span of several years to help extend the actuarial life of the fund.
“We must all continue to do our best to manage the unfunded liabilities, extend the actuarial life of the fund while improving benefits for our members,” Aguilar said.