Position Paper on Senate Bills Increasing the SSS pension

Delivered on the Hearing of the Senate Committee on Government Corporation and Public
Enterprises, October 19, 2016
The SSS will always insist that even if they support the increase in SSS pension it will shorten its
fund life or increase its unfunded liability. It will take the strongest political will on the part of
Congress to address the current inhuman pension rates despite SSS opposition. Otherwise, there
is no hope that our SSS pensioners will ever live a decent life in their retirement years.
While a succession of SSS Management Boards admit that the pension level is indeed very low
they have refused to increase pension unless premium contribution is increased. Pensioners,
however, contend that the main reason for the insufficient funding of SSS and its inability to
fund a pension increase is its extremely inefficient collection of contributions, failure to recover
receivables by prosecuting employers who failed to remit employees contribution, and the
inordinate perks and bonuses the Board gives itself in spite of these inefficiencies. The SSS
failed to undertake institutional reforms that will address these inefficiencies for so long and is
the one in fact resorting to a quick fix solution of solely relying on contribution increases to
fund benefit improvements.
We propose a more reasonable, just and sustainable course of action: Immediately address the
dismal condition of SSS pensioners by increasing the pension this year while at the same time
working towards institutional reforms in the next five years to strengthen the SSS fund life and
its capacity to provide services and fulfill its social security function.

The need for pension increase

There are 34.2 million members of the Social Security System (SSS) and 2.018 million[1]
pensioners. In 2015, a third of SSS retirees (34%) receive less than P 2,000 per month, and half
(52%) receive less than P 3,000[2]. Ninety percent (90%) of the pensioners receive P6,000 or
lower every month.[3]
There was no question that the SSS pension increase is long overdue and badly-needed. The
P1,200 and P2,400 minimum pension for those who contributed for ten and twenty years,
respectively, was pegged in 1997. Nineteen years have passed, even with some pension increases
as reported by SSS, and yet the minimum pension remained as they were. The erosion of the
value of the 1997 minimum SSS pension to only P518.86 and P1,037.72 for P1,200 and P2,400
pension, respectively[4], only validates the suffering of SSS pensioners all these long years.
Indeed, how can a SSS pensioner/senior citizen provide for his basic needs -- food and
maintenance medicines included, with only P40-P80 a day for a pension?
The minimum pension is grossly inadequate based on the P1,096 per day needed by a family of
six in NCR[5].

This consideration of the poor state of our SSS pensioners have prompted the lawmakers both in
the House of Representatives and in the Senate during the 16th Congress to vote in favour of
House Bill 5842, 211-0 and 15-1 votes, respectively.
The P2,000 increase would have been an early Christmas gift to the pensioners in 2015. But the
hopes of the SSS pensioners were soon wiped out with the veto of former President Benigno
Aquino III.
House Bill 475 is the refiled version of HB 5842, filed by this Representation this 17th Congress,
which seeks to provide immediate relief to the mostly impoverished SSS pensioners. While it
does not provide for the P5,000-P7,000 minimum needed by the pensioners, the modest increase
will definitely make a difference for the pensioners especially those in their twilight years. The
bill also makes sure that future pensioners will be benefitted as the minimum pension is also
increased. HB 475 was approved by House Committee on Government Enterprise and
Privatization during its first Committee meeting on September 7, 2016.

Various Positions on the Proposed Increase

Most pensioners are in support of the SSS pension increase bill, and have in fact attended the last
few sessions of the House of Representatives during the 16th Congress hoping for a
Congressional Override. To date, they continue to send numerous letters/messages and petitions
in support to SSS pension increase bill.
At least 132 congressmen signed the resolution in support of Congressional Override of the
Presidential veto on HB 5842.
Recognizing the inadequacy of the present pension for the needs of the retirees especially those
with maintenance medicines, President Rodrigo Duterte expressed support to the proposed
P2,000 SSS pension increase even before he was elected into office. He said that the members
deserve to have the increase after working hard for their monthly contributions during their
younger years.
The SSS, meanwhile, has maintained the same stand since Bayan Muna representatives first
filed the pension increase bill in 2011 and during the many deliberations in the House Committee
on Government Enterprise and Privatization, that is, no increase can be given to pensioners
because it will significantly reduce the SSS fund life. If the P2,000 across the board pension
increase is granted, SSS fund life will be reduced[6]. The ultimatum of SSS is quite clear, either
hike the premium to 17% or else, the funds will dry up by 2025. SSS insists on maintaining its
fund life, currently pegged to last up to 2042. In a choice of helping lengthen the lives of its
pensioners or that of the SSS fund, the SSS clearly chose the latter.
Former President Aquino echoed the SSS position that the P2,000 increase will bankrupt the
SSS, allegedly to the detriment of the SSS members.

Woefully, the SSS is pitting the next generation of SSS pensioners against existing pensioners,
by showing through its latest computations and presentations that the discrepancy in total
contributions and total benefits will be carried and paid for by next generation pensioners, which
by their own admission is the common state of social security systems among other countries
including the US. SSS stressed that percentage return on investment of benefits for pensioners is
18-37%. But it failed to show how the return on investment of SSS funds of 8% never caught up
or even come close to this return on investment on contribution and benefits for the pensioners.
There seem to be some disconnect with the gloomy picture raised by SSS and its very positive
financial performance in the past years. Based on reports[7], its net revenue increased more than
fourfold from an average of P8 billion for the period 2000 to 2009 to P35 billion for the years
2010 to 2015. For 2011 to 2015, SSS assets swelled to P444 billion, a 50-percent increase from
P298 billion in 2010.
Worse, the SSS does not portray an institution that seems to be in need of funds. It does not
exert adequate effort to go after unremitted premiums by employers, it does not even bother to
collect the fines imposed by courts on those found guilty of violating the SSS law. Worse, it
grants its board members not only P10 Million in bonuses but also more than P200 Million in
retirement package in 2009. Its service to members have been dismal for years despite the
average of P7 Billion in operation expenses for more than 5 years.
Moreover, SSS seems not to be serious in increasing its investment. In fact for 2015, SSS posted
an investment income of PHP 28 Billion, 6 billion lower than the investment income in 2014[8].
This is echoed by the fact that, for the longest time, SSS did not even consider tapping fund
managers to expand investments, a clear admission of how the SSS Board failed to increase its
investments at a desirable rate.
This obsession on fund life at the expense of its very pensioners is highly misplaced since other
first world countries have lower fund life, US in particular has a fund life of 2035[9] , while
UKs fund life is 2027[10]. While the US social security system incurred an unfunded liability of
approximately $9.43 trillion[11] in order to provide its citizens adequate social security, our SSS
would rather sacrifice its members and abandon its social security mission based on the threat
that a 9 year fund life will bankrupt the system.
This argument is immediately disproved because in 2001 the fund life of SSS was a mere five (5)
years due to behest loans it granted to big debtors and yet it managed to survive. This means that
SSS and the government can find a way to increase the SSS fund life if only they want to. Pag
gusto may paraan, pag ayaw, may dahilan. If SSS is willing to risk a short five year fund life to
fund favored rich debtors, there is no justification why it will not give a well- deserved pension
increase merely because it will supposedly decrease its fund life to 17 years. The truth is, all
social security systems have unfunded liabilities and a definite fund life, many of which are less
than 15 years, but they still increase pension not only as a social justice measure but also as a
development tool to help improve the economy.

Our Proposals:
The 2025 fund life is based on the premise that the SSS and government will do nothing from
now till the supposed shortened fund life. But as was discussed in the deliberations of the House
Bill 5842, the most important and urgent task is to approve the pension increase, and then put in
place some mechanisms so that SSS will be up to its mandate, which is, to manage a sound and
viable social security system which shall promote social justice and provide meaningful
protection to members and their families against the hazards of disability, sickness, maternity, old
age, death and other contingencies resulting in loss of income or financial burden.[12] There is
more than enough time to look for solutions, if only the SSS is willing to work for it.
Based on these, we believe a P2,000/month increase is viable, and necessary, and its impact can
be mitigated after 2016. We recommend the following:
1.

Immediately approve the Senate bills providing for the P2,000 across-the-board SSS
pension increase without prejudice to helping increase the capacity of SSS to provide
benefits.

2.

Tap the pension benefits from a more efficient handling of SSS investment and assets.
As of 2015, SSS has total investment of P426.66 billion[13] and total assets of P445
billion[14].
We can study the experience of Canada Pension Plan. From a fund life of 2022[15] in
2014, the Canada Pension Plan has instituted reforms which included the improvement
in its investment income and set the minimum contribution rate (9.9%) that will sustain
the plan for at least 75 years[16].

3. Penalize & collect billions in unremitted premium contributions and penalties from
delinquent employers. According to COA Executive Summary Report in 2015,
delinquency in premium contributions and penalties of 13,886 branch employers in the
NCR stood at P4.845B[17]. In 2013 COA Report[18], there are 61,260 delinquent
employers with P13.5B unremitted contributions and penalties. But reports from the
Senate hearings in 2004 during the discussion on the SSS condonation law, the
unremitted contributions run up to P90 Billion.
4. Subsidize the pension system, if necessary, from the government budget similar to the
government subsidy for the AFP and PNP. It is unjust that military and police officers get
subsidized while ordinary SSS pensioners who were poorly paid as workers are deprived
of the same government support. Study and implement possible government fund
support to SSS. Other countries like Vietnam, Japan and Brunei subsidize pension and
other benefits.[19]
Allocation for government support to the SSS can be sourced from:
-

Annual savings based on the reports of the Bureau of Treasury;

Excess appropriation for the pension of uniformed personnel;

Sovereign guaranty to foreign corporations like the P30 B Risk Management Fund, or
the P4B subsidy to the electricity of Hanjin, Phoenix Semiconductors and Texas
Instruments.

5. Study and file a legislation automatically adjusting the pension based on the inflation rate
and cost of living and the premium rate based on the average revenues of companies and
employers and wage increases for the workers.
6. Other reforms:
a. Prohibition of big sums of bonuses/retirement packages to the Board members and
other high officials.
b. Improve collection of loan payment, fines and other penalties.
c. Study the effect of increasing the maximum salary credit.

Conclusion
SSS seemed to be contented that if a pension increase takes place it will merely ask for an
automatic, yet difficult to attain, contribution increase. They are even asking for additional
authority to adjust the contribution and benefits, without necessarily addressing the issues being
raised by the pensioners and members. It is up for Congress to summon the political will to do
what should have been done by SSS two decades agoincrease the pension of our senior
citizens and allow them the opportunity to enjoy a little comfort in the remaining years of their
lives. They worked hard to build our country during their active years. It is our obligation to
recognize their contribution to society and give them what is just and due to them, before it is too
late. #
[1] Social Security System, Facts & Figures as of June 2016,
https://www.sss.gov.ph/sss/DownloadContent?fileName=Facts_And_Figure_June2016.pdf
[2] Coalition for the Services of the Elderly, The feasibility of a universal pension in the
Philippines preliminary findings, March 2015
[3] SSS presentation to the Committee on Govt Enterprise and Privatization, May 26, 2015.
[4] Bayan Muna: SSS pension with inflation adjustment, 2015
[5] http://ibon.org/2016/07/raising-minimum-wage-can-revitalize-domestic-economy-ibon/
[6] http://www.interaksyon.com/business/112952/sss-says-cannot-sustain-p2000-hike-inpensions
[7] http://www.businessmirror.com.ph/clarification-on-sss-reporting-practice/

[8] http://www.bworldonline.com/content.php?section=Finance&title=investment-income-ofsss-lower-at-end-2015&id=127222
[9] http://www.heritage.org/research/reports/2015/07/social-security-39-billion-deficit-in2014-insolvent-by-2035
[10]
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/336829/QR_2
010_report_17_July_2014.pdf
[11] http://www.heritage.org/research/reports/2015/07/social-security-39-billion-deficit-in2014-insolvent-by-2035
[12] https://www.sss.gov.ph/sss/appmanager/pages.jsp?page=sssmandate
[13] http://www.mb.com.ph/sss-posts-p28-b-investment-income-roi-at-6-9-in-2015/
[14] http://www.pressreader.com/philippines/philippine-dailyinquirer/20160423/281852937751262
[15] http://www.osfi-bsif.gc.ca/eng/oca-bac/ar-ra/cpp-rpc/pages/cpp26.aspx#Toc-1c
[16] http://www.osfi-bsif.gc.ca/Eng/Docs/cpp27.pdf
[17] COA Annual Audit Report for Social Security System, 2015
[18] Social Security Programs Throughout the World: Asia and the Pacific, 2012
http://www.socialsecurity.gov/policy/docs/progdesc/ssptw/2010-2011/asia
http://www.coa.gov.ph/phocadownloadpap/userupload/annual_audit_report/GOCCs/2013/Cor
porate-Government-Sector/Social-Security-System/SSS_ES2013.pdf
[19] RA 8282 or SSS Law provides for government support:
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SEC. 20. Government Contribution. As the contribution of the Government to the
operation of the SSS, Congress shall annually appropriate out of any funds in the National
Treasury not otherwise appropriated, the necessary sum or sums to meet the estimated
expenses of the SSS for each ensuing year. In addition to this contribution, Congress shall
appropriate from time to time such sum or sums as may be needed to assure the
maintenance of an adequate working balance of the funds of the SSS as disclosed by
suitable periodic actuarial studies to be made of the operations of the SSS.
"SEC. 21. Government Guarantee. The benefits prescribed in this Act shall not be
diminished and to guarantee said benefits the Government of the Republic of the Philippines
accepts general responsibility for the solvency of the SSS.
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