MANILA, Philippines – Malacañang has released conflicting data on the supposed yearly deficit the Social Security System (SSS) would incur if President Aquino did not veto the P2,000 across-the-board pension hike proposed in Congress.
In the veto message sent to Congress on Thursday, the Palace said SSS would have a deficit of P16 billion to P26 billion per year if the bill was approved.
But in an infographic entry in the Official Gazette released Thursday afternoon, the administration said the annual deficit would be P26 billion to P29 billion.
The STAR sought explanation from Malacañang but got no response as of press time.
In the veto message, Aquino explained that SSS annual revenue stands at P30 billion to P40 billion, lower than the P56-billion requirement for the pension increase.
He said that with such deficit, SSS would be compelled to tap into its reserve fund, shortening the fund life up to 2027 in the process.
Malacañang, in its releases in the Official Gazette, also floated the idea of increasing the current contribution of active members so that the SSS would not have to tap into the reserve funds just to avoid incurring deficit.
Aquino said the decision to veto the bill, while unpopular, was the smart thing to do, as the increase would affect the 30 million active members of the SSS.
He noted that the increase would only benefit a small percentage of the population, or around 2.15 million pensioners.
Revenue, collection rate
A review of the financial status of the SSS showed a clearer picture.
While the President was correct to place the SSS investment revenue at around P30 billion to P40 billion, the 2014 SSS annual report showed contribution from members was higher than total payout of benefits.
The annual report also showed that SSS had a comprehensive income of P46 billion in 2014, putting the deficit for the pension hike – using these figures – at only P10 billion.
The income is computed by deducting the total amount of benefits payout and operating expenses from membership collection and investment revenue.
In 2014, SSS expenditures totaled P110.712 billion – P102.598 billion for benefits payout and P8.113 billion for operating expenses. Revenues amounted to P155.180 billion representing P120.650 billion from membership collections and P34.530 billion from investment revenue.
The government-owned and controlled corporation had reserve funds of P418.316 billion in 2014.
Bayan Muna Party-List Rep. Neri Colmenares, proponent of the bill, disputed the argument that the only way for SSS to match the deficit is to tap its reserve funds or raise the current rate being paid by members.
He noted that SSS has yet to improve its collection efficiency rate, which by his estimate is only 38 percent.
SSS has no data on its collection efficiency rate on its website, although it has repeatedly claimed having increased the amount of its revenue collection since 2012.
Right thing to do
Amid the furor over Aquino’s vetoing the proposed pension hike, SSS officials insisted the President did the right thing and that doing otherwise would require retirees to contribute 4.8 percent of their monthly salaries to sustain the fund.
“Unpopular as the veto decision may be, it was the right thing to do,” said Michael Victor Alimurung, SSS commission representative for the general public.
He said Aquino deserved praise for saving the institution from bankruptcy when the latter returned House Bill No. 5842 to Congress without his approval.
“It shows that the President is principled enough to withstand pressure, by refusing to support a bill that he knows will lead to the financial ruin of the SSS,” he said in a statement.
At current levels, SSS funds are enough until 2049, or 33 years from now. This could shorten to an “alarming” 13 years or until 2029 if the proposed pension hike is approved.
Based on SSS computations, contributions from its 31 million members would have to be increased to 15.8 percent from the current 11 percent to fund the pension hike without shortening the life span of the fund.