Weak and shallow is our understanding of social security if PNoy and the Social Security System have made us believe that the proposed P2,000 increase in pensions would benefit its 2.15-million pensioners to the detriment of its 30-million members.
In fact, the chain that binds together any national social security program is the social contract of the young contributing workers to support the old non-contributing pensioners and of the strong to support the weak.
This social contract is akin to our national tradition of “Bayanihan” and a positive response of the international community to the reality that “poverty anywhere is a threat to prosperity everywhere.”
Within the family, it means that as today’s parents support their sons and daughters, so will these children support them someday.
In our Constitution, we have specifically assigned to the family, in tandem with government, this responsibility of caring for our elderly pensioners and non-pensioners.
In Article XV, Section 4:
“The family has the duty to care for its elderly members but the State may also do so through just programs of social security.”
Most social security schemes are funded on a pay-as-you-go basis, but our SSS has been insisting lately that its scheme is one that requires full funding and zero unfunded liability.
It may have developed its confused view of social security soon after the World Bank published in 1994 Estelle James’ “Averting the Old Age Crisis: Policies to Protect the Old and Promote Growth.”
Warning that we had a looming old age crisis—or pension time bomb, according to WB officials—they made our finance officials believe that we had trillions of pesos of unfunded pension liabilities that government would eventually assume.
These WB officials even paid the Government Service Insurance System president a courtesy call and told him—without being asked—about GSIS’s huge unfunded liabilities. Finding this unsolicited advice rude, he lost his cool and threatened to throw them out of the window unless they leave immediately.
But maybe GSIS heeded their warning, because immediately thereafter, it increased its contribution rate from 18 to 21 percent and removed its contribution salary cap. By now, GSIS has grown its assets into a trillion peso reserve fund.
SSS must have also taken to heart WB’s warning. But unlike GSIS, it hesitated to reform its financial system, and simply froze into inaction whenever employers opposed its initiatives to increase contributions. It even developed a phobia for unfunded liabilities and became averse to any pension increase.
For instance, in the past 5 1/2 years of PNoy’s administration, it granted but once a token 5-percent pension adjustment. But, had it increased pensions by P500 four times, it would have released by now that P2,000 pension increase.
Worse, SSS has de-facto abandoned its concept of social insurance by de-emphasizing its defined-benefit scheme. Instead, it chose to adopt WB’s defined-contribution or individual account system where one may only draw his pensions from his own contribution savings.
This is the “kanya-kanya” or “to each his own” type of pension funding, which deviates significantly from the pooling of risks that characterizes social security programs.
Employing this funding scheme, SSS has lately launched its pension augmentation solution to its pension inadequacy problem, and calls it the “Personal Equity and Savings Option” or PESO Fund.
How proudly it announced, right before its anniversary last year, that it “has already drawn over 100 enrollees, with total investments now past the P1-million mark since its limited launch in 10 SSS branches in Metro Manila last May 2015.”
SSS justified this by declaring that:
“Since regular SSS contributions only cover a maximum income of P16,000, members with the capacity to save more now have an additional option to augment their retirement savings through the SSS PESO Fund program.”
In fact, only 163 members have placed P1.4 million with SSS. Thus, SSS has nothing yet to brag about since each would have a one-time average pension augmentation of only P8,589.
It was modelled after the SSS Flexi-fund for overseas Filipino workers. But how successful has this program been?
Launched in 2001, it was announced also then that program “currently has over 45,000 OFW enrollees and a total members’ equity of around P485 million.”
This program is therefore practically worthless to OFWs.
Why? Because the amount that awaits an OFW to augment his retirement pension—after participating for 15 years—is a one-time withdrawable amount of P10,778 only.
How could such an under-achievement be justified by the 20 SSS foreign offices that operate in Brunei, Hong Kong, Kuala Lumpur, Macao, Singapore, Taipei, Tokyo, Toronto, Abu Dhabi, Al Khobar, Bahrain, Doha, Dubai, Jeddah, Kuwait, London, Milan, Muscat, Riyadh, and Rome?
The SSS would have even exhausted this P485-million fund had it taken from it the operating expenses of these offices.
If SSS is indeed protective of the pension interests of its 30-million members—to the point of denying its 2.1-million pensioners their P2,000 pension increase—then it must discontinue now its flexi-fund programs and revert to its abandoned social contract of social insurance funding.
