by Ben O. de Vera, Inquirer, Feb 1, 2018
Raising the contribution rate of Social Security System (SSS) members to 14 percent would make the pension fund for private workers at par with that of government employees, Social Security Commission chair Amado D. Valdez said Thursday.
“We are pushing for a gradual increase in the contribution rate and monthly salary credit (MSC) because we want pension equity among workers in the government and in the private sector,” Valdez said.
“Government retirees have higher pension because their contribution rate is at 21 percent of their actual salary as compared with those working in the private sector, whose SSS contributions are only 11 percent of their salary capped at P16,000,” Valdez explained, referring to the higher contributions being collected by the Government Service Insurance System (GSIS) from government personnel.
“For example, a private sector employee who earns P25,000 only contributes P1,760 based on a P16,000 maximum MSC to the SSS while a government employee who earns the same amount contributes P5,250 to the GSIS. This results in a significant difference between the amount of pension being received by a private worker and a government employee. And this is what we want to address to make the pension of private workers at par with those in the government,” Valdez explained.
As such, the SSS is seeking President Duterte’s approval of an executive order to raise the contribution rate from 11 percent at present to 14 percent, of which the bigger amount equivalent to 8.87 percent will be shouldered by the employer.
The SSS was also pitching to jack up the minimum MSC to P4,000 from the current P1,000, while the maximum MSC will be increased to P20,000.
The combination of hiking the contribution rate as well as the minimum and maximum MSCs would raise the minimum and maximum contributions of SSS members to P560 from P110 and to P2,800 from P1,760, respectively, Valdez said.
“The increase in contribution is only about P450 for those who will pay at the minimum MSC of P4,000 while those earning at least P20,000 will only add P1,040 to their monthly SSS contributions. We wish to thank in advance our employers who will share half of the increase in their employees’ SSS savings,” he said.
According to Valdez, “majority of SSS members who pay at P10,000 MSC would have a corresponding increase of P300 in additional contribution under the proposed pension reform agenda.”
“Let us look at the SSS not as an expense but as savings in times of financial contingencies and most especially for retirement,” according to Valdez.
For SSS president and chief executive Emmanuel F. Dooc, the planned contribution rate hike “will translate to higher benefits for members and pensioners since benefit computation is based on the number of credited years and MSC.”
“Under these reforms, the monthly pension of a member who retires with 35 paying years and P20,000 average MSC will be at P15,300; whereas under the current MSC ceiling of P16,000, they will receive a lower pension at P12,500,” Dooc said.
“In addition, other benefits will consequently increase such as for maternity—by P10,400 (from P41,600 to P52,000) for caesarian delivery, and by P8,000 (from P32,000 to P40,000) for normal delivery. The daily maximum benefit for sickness will be computed at P600 per day from the current P480; and funeral benefits will increase from P29,600 to P32,000 for those who paid at least 120 contributions with an average MSC of P20,000,” Dooc added.
Dooc earlier said they were awaiting the President’s go-signal to implement the 3-percentage point increase in the SSS’s contribution rate by April.
The SSS was unable to implement the contribution rate increase as initially scheduled in May last year as it awaited passage of the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
The higher contribution rate would allow the SSS to extend the fund life to 2044 from the current 2032, which Dooc said would be “even better” than the fund life of until 2042 before the President green-lighted higher pension benefits last year.
To recall, President Duterte had ordered that the SSS members’ contribution rate be raised in increments of 1.5 percentage points per year until 2020 to reach 17 percent from the current 11 percent.
The contribution rate hike is necessary because the SSS’s actuarial life will be reduced by 14-17 years to 2025-2028 if members’ contributions are increased.
President Duterte in January last year approved a two-stage monthly pension hike of P2,000, of which P1,000 per month were already being disbursed to pensioners since March.
The latest SSS data showed that its net income plunged to P9.69 billion as of end-November last year mainly because of the pension increase.