'GSIS educ plan woes bigger than housing mess'


Posted at May 13 2011 11:04 AM | Updated as of May 14 2011 12:20 AM

MANILA, Philippines - State pension fund Government Service Insurance System (GSIS) has stopped giving housing loans, with defaults at P11 billion or 40% of its total housing loan portfolio.

While that's bad news for many of the 1.4 million government employees who are members of GSIS, it's not a threat to the agency.

GSIS President Robert Vergara said housing loans are a small part of their total loans, which are a fraction of GSIS' total assets.

"The P11 billion is 40% of total housing loans of P26 billion. In context of total assets of P550 billion, it's really not a big amount...It's not really a big problem," Vergara told ABS-CBN News.

Vergara said in a way, the housing loan problem is smaller than the pension fund's education plan problem.

GSIS' education plan fund lacks as much as P15 billion as tuition has climbed in past years.

The problem is that education plans come from a smaller fund than the housing loans, and paying 100% of education plans would deplete the fund.

The GSIS stopped selling the education plans 4 years ago because the products were not priced correctly .

"When we sold them in the early 90s, nobody foresaw how high the tuition could sharply rise. We ourselves are struggling to meet the promises our policies should carry," Vergara said.

Right now, GSIS is just paying about 70% of what they promised to parents until they find a solution. There are about 100,000 active policy holders of GSIS's education plans.

"It's a similarly-sized problem but because the fund its contained in is smaller, it has disproportionately large impact on the solvency of the fund," Vergara said.

"We cannot just decide to fully reimburse what people feel we should be paying for tuition. It will rapidly go down to size and there will be no funds left for those too young to avail."

Vergara said a review of the pension fund's operations revealed no other potential losses of similar size.

He even clarified that the overseas investments GSIS made in 2008 didn't really lose but did not make as much as GSIS requires.

GSIS has started withdrawing its investments worth $675 million in overseas bonds and stocks, and is considering reinvesting the money in the local market.

Vergara said the agency expects to receive the full amount from its overseas investments sometime in June, but added the transfer would have limited impact on the foreign exchange market as the fund had already hedged the amount.

GSIS began its overseas placements in 2008, investing $600 million in stocks and bonds in countries such as the United States, United Kingdom, Germany, France, Japan, and Australia. With reports from Coco Alcuaz and Warren de Guzman, ANC; Henry Omaga Diaz, ABS-CBN News; and Reuters