Duterte eyes compromise on SSS pension hike

Dharel Placido, ABS-CBN News

Posted at Dec 29 2016 05:33 PM | Updated as of Dec 29 2016 05:41 PM

MANILA – President Rodrigo Duterte on Thursday said he is still studying whether to approve the proposal of the Social Security System (SSS) to increase the pension of its members in two tranches beginning January 2017.

In an exclusive interview with ABS-CBN's Lynda Jumilla, Duterte admitted that some of his Cabinet members are having debates on whether the SSS pension hike would be good for the state-run insurance institution.

“There’s a debate going on. Because [Budget Secretary Benjamin] Diokno and [Finance Secretary Sonny] Dominguez, ayaw nila itong ano, because it will go bankrupt, itong SSS,” Duterte said.

“Hindi ko pa pinipirmahan. Nandyan yung dalawang papel. I’ve been studying it,” he added, referring to proposals to increase the pension and the contribution of members.

(I haven't signed it. The two papers are there. I've been studying it.)

Dominguez, Diokno, and National Economic and Development Authority (NEDA) Director-General Ernesto Pernia earlier said that without an accompanying “upward adjustment or restructuring of the [SSS] contribution rate,” the proposed pension hike would unduly jack up the unfunded liabilities of the SSS from P3.5 trillion to P5.9 trillion.

The President's reaction came as the SSS is set to release the first tranche of the P2,000 increase in January next year.

Duterte said, while he acknowledges the adverse effects that an increase in pension might bring to SSS, “ang problema nyan eh (the problem) is we promised [it] to the people, so we will just have to go somewhere in there.”

“The end-game is that the government has guaranteed the solvency always of SSS so that if it runs short of money, the government must go in. Ang problema, idamay mo yung hindi myembro [ng SSS], because you’ll get the money from taxpayers,” he said.

SSS ACTUARIAL LIFE

The three Cabinet secretaries have argued that since the government subsidy "only introduces undue fiscal burden to taxpayers,” then “the public must not be made to carry the burden of the increase which benefits only privately employed individuals.”

The SSS is set to implement a staggered P2,000 across-the-board increase in its monthly payments to member-pensioners now numbering 2.2 million. The first tranche of P1,000 will be given starting in January 2017, and another P1,000 in January 2019.

The three secretaries believe that the resolution “may adversely affect" the country’s credit rating,” and that the “SSS would be bankrupt and left with no funds for other members in the future.”

Without a corresponding increase in member-contributions, the three secretaries warned that the congressional proposal would cut the actuarial life of the pension fund by 14 to 17 years from 2042 to 2025-2028 because the SSS will have to cough up an additional P32 billion annually to cover the initial P1,000 hike and P62 billion for the entire P2,000 increase in monthly payments.

“We strongly recommend that any improvement in pension benefits be accompanied by an upward adjustment or restructuring of the contribution rate from employee members and their employers, as well as self-employed and voluntary members,” they said.

“We do not believe it is unfair to ask for this increase as pensions have increased 22 times while the contribution rate has only increased three times since the establishment of the rates in 1980,” they added.

The three secretaries are proposing an increase in the SSS member- contributions from the current 11 percent to 17 percent after the implementation of the pension hike.

They are also recommending that the first tranche of the pension hike be carried out once Congress approves the first package of the Comprehensive Tax Reform Program.

“We believe matching additional benefits with increase in contribution is the best action government can take from a fiscally sound and equitable standpoint,” they said, noting that the proposed pension hike would “benefit only 2.2 million pensioners while the rest of the taxpayers will need to bear the fiscal burden that it will result to.”

Duterte’s predecessor, Benigno Aquino III, vetoed a proposed measure from Congress increasing the pension of SSS members by P2,000, saying the SSS won’t be able to handle the hike.