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Thursday, August 22, 2019

Honeyman: Cruelty

IT WAS cruel to raise pensioners’ hopes, just to have these dashed so unceremoniously.

The average pension paid to 2.15 million Social Security System (SSS) pensioners is P3,169 per month. Not a lot and an extra P2,000 per month would make an enormous difference.

I was disappointed when the Senate passed the proposed Social Security Act (House Bill No. 5842) by 15 votes to 1.

Only Senator Juan Ponce Enrile, the lone dissenter, took the trouble to do the math and recognized that SSS scheme could not afford the large proportionate increase involved.

The bill was passed to President Benigno Aquino III for his signature.

PNoy wisely passed the bill to SSS for its comments. SSS said it could not afford it and confirmed that P2,000 per month for 2.15 million pensioners for 13 months a year comes to P56 billion per annum.

As required by the Constitution, PNoy sent the bill back to Congress giving his reasons why he would not sign it.

End of story?

I doubt.

There will be much focus on the SSS, its role and its performance. I believe that the pension scheme should be separate from the other SSS activities such as salary loans, and sickness and disability benefits.

Many SSS members are making voluntary contributions and would not avail of loans and sickness payments. These voluntary contributors should, if they wish, require that all their contributions are earmarked for their future pensions.

In any case, the contributions are too low. The contribution is only 3.63 percent of income subject to a maximum income of P15,000. Employers pay 7.36 percent. Unless the employees’ contributions are raised to 5 percent and the employers’ to 10 percent, the SSS will soon go bankrupt.

SSS is currently in a demographic sweet spot with 31 million members of whom only 2.15 million are pensioners. Many members are nearing retirement age. Within a few years, there will be over three million pensioners. The scheme will be seriously challenged.

Furthermore, on average, we are living longer than our parents’ generation. This is another challenge to the viability of any pension scheme.

Inflation is the enemy of all those who live on fixed incomes. Last week’s Sun.Star Bacolod informed us that in terms of 2006 money, P1 is now worth only 71 centavos.

This means that it takes P3,000 now to buy goods that only cost P2,130 in 2006. Our pensioners suffer immensely from a pension scheme that does not cope adequately with inflation.

Yesterday’s advertisement in the nation’s broadsheets from former soldiers, sailors, airmen, marines, and policemen who assert that their inflation-resistant pensions are under Congressional threat is of cause for concern.

We all have our own inflation rate depending on how we spend our money.

When I first arrived in the Philippines 20 years ago, a case of San Miguel’s fine amber fluid (which, by the way, fuels the production of these articles) cost P177. Manageable. Now the same case costs P519, almost triple than before. This represents an increase of 5.6 percent compounded annually. Few can keep up with this. I can’t.

What to do?

It is clear that we cannot have a viable pension scheme without government funding. This is what the well-meaning drafters of the proposed Social Security Act should have included.

Under my proposed scheme, every year government actuaries examine the state of the SSS investments and add government funds as necessary to keep the scheme viable. This would be the breakthrough legislation that the nation’s pensioners urgently need.

A radical change, but sometimes a radical change is needed.

This is one of them.

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