STATE-RUN Social Security System (SSS) will increase the contribution rate on employers and workers as part of the pension fund’s move to raise benefits for its members.
In a statement, Emilio de Quiros Jr., SSS president, said the pension fund would update its pension structure to respond to the workers and pensioners’ request for more meaningful benefits.
“The SSS operates on the principle of forced savings and cross-subsidy to enable workers to accumulate savings for retirement. But the present system has impediments that hinder the workers from saving more,” de Quiros said.
Last week, the SSS started consultation meetings with labor representatives, employers’ groups and other stakeholders on upgrading benefits, which would require increasing revenues from contributions.
The SSS contribution rate of 10.4 percent of the monthly salary is less than half the 21 percent imposed on the public sector by the Government Service Insurance System. The average contribution rate is 23 percent among Asian countries and 35 percent among European countries.
De Quiros said SSS plans to raise its contribution rate by 0.6 percent to 11 percent of the monthly salary, to be equally shared by employers and workers.
Such move would add seven years to its fund life and provide leeway for benefit enhancements.
He said the maximum monthly salary credit, the ceiling that serves as basis for contribution payments, will be increased to P20,000 from the present P15,000 to enable workers with bigger salaries to save up for retirement through higher contributions.
Without structural reforms, de Quiros said that the benefit increases would strain the fund and shorten its actuarial life, which at present is projected to last until 2039, according to the 2007 actuarial valuation.
He said the increase would allow a P500 one-time grant to pensioners, 10 percent across-the-board increase in pension, and higher computed benefits for active members.
“Our actuarial study shows that the increase in contribution rate and higher ceiling would lengthen SSS fund life from 2039 to 2046 even with the 10 percent across-the-board increase and P500 grant,” de Quiros said.
“If the SSS does not start to make small adjustments now, the time will come when it will be forced to increase contribution rates significantly to ensure that those paying contributions today will get pensions in the future,” he said. –Katrina Mennen A. Valdez, Manila Times
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