THE Social Security System plans to raise membership dues in the next two years in a bid to lengthen the pension fund’s actuarial life and provide better returns to beneficiaries.
Emilio de Quiros Jr., SSS president and chief executive officer, said membership dues will be increased by a percentage point in 2013 and every two years thereafter.
He said the pension fund is reforming its benefit structure.
“We hope to complete the reform program within the year,” de Quiros said.
The reform program has three components, namely raising the monthly contribution rate, increasing the monthly salary credit ceiling, and lifting the pension by 10 percent.
De Quiros said that without structural reforms, benefit increases would diminish the fund and narrow its actuarial life.
Under the 2007 actuarial valuation, the pension fund’s life is seen to last until 2039.
“We need to increase the rate of contributions so we can also improve the package of benefits to the members,” de Quiros said.
“Raising the contribution rate lengthens the life of SSS. Its actuarial life has gone up to 2039 but ideally, the pension fund’s actuarial life must be 70 years,” he said.
The SSS operates on the principle of forced savings and cross-subsidy to enable workers to accumulate savings for retirement.
But the SSS contribution rate of 10.4 percent of the monthly salary is less than half the 21 percent in the public sector under the Government Service Insurance System. The average contribution rate among Asian countries is 23 percent and among European countries, 35 percent.
De Quiros said SSS is raising the contribution rate by 0.6 percent to 11 percent of the monthly salary, to be equally shared by employers and workers.
He said this would add seven years to its fund life and would enable SSS to provide better benefits.
The move would likewise extend the benefits and pension to its members from 2039 to 2049.
The last increase in the contribution rate by a percent was made in 2007.
“We are looking at a gradual increase to 14-15 percent, but this is on the high side. It would depend on the state of the economy, if it could sustain higher salary levels for employees,” de Quiros said.
He said the 0.6-percentage point increase in the monthly contribution rate would translate to a minimal increase in actual contributions.
A monthly salary of P15,000 would translate to additional contributions of P90 per member to be shared by the employee and their employer.
The adjustment in the monthly salary credit ceiling, which is the basis for contribution payments, would likewise increase contributions.
From the present P15,000 monthly salary credit cap, the ceiling would be raised to P20,000 to allow employees with bigger salaries to save up for retirement through higher contributions.
De Quiros said that raising the maximum monthly salary credit would translate to higher pension benefits, including a 10-percent across-the-board increase.
“The pension is tied to the monthly salary credit ceiling. The average pension right now is P3,000. Retirees have been complaining that their pension benefits are not even enough to pay for their medicines and medical bills,” he said. –KATRINA MENNEN A. VALDEZ REPORTER, Manila Times
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