News article from Mb.com.ph by Chito A. Chavez

SSS national benefit payouts went up by five percent from P34.10 billion (during the first five months of 2011) to P35.74 billion for the same period this year.As claimed by the SSS President and Chief Executive Officer Emilio de Quiros Jr., Southern Mindanao’s increment by 8 percent is higher than the national average of 5 percent[1].This could be rooted from the increase of maternity benefits by 11% (which is the highest rate of increase posted) as well as the increase in retirement claims by 6%. On the other hand, due to the enhancement of the ACOP, better known as the Annual Confirmation of Pensioners and the cancellation of 584 accounts, savings of P18.63 million annually for the pension funds is guaranteed.

Generally, the increase in the disbursements of SSS highlights the improvements being taken by the institution which includes electronic and internet-based transactions, intensified collection efforts, and robust investment income to name a few . These little developments provide exposure to the members which play a vital role in the introduction of annuities market in the country.

Furthermore, it could be claimed that the total contributions of the members outpaced the total amount of benefit payouts. As of March 2012, SSS’s total contribution amounted to P23,740.50 (in millions), whereby an amount of P 39,567.5 (in millions) can be expected by May and its total benefits paid as of the same period is P21,638.29 (in millions)[2]. This difference could help in the improvement of Social Security System’s objectives of building up its Investment Reserve Fund and lengthening the actuarial life of Social Security fund. The increase in the benefit claims will continue to be beneficial to its members as long as the SSS contributions are enough to pay the benefits—contributions exceed benefit payouts. 

However, the collection of SSS contributions faces a possible threat of being lesser than what it can pay out to its beneficiaries because the population growth rate of the Philippines is expected to diminish through time. As forecasted, from the annual growth rate of 1.81 (2010-2015), this will go down to 1.63 by the end of 2015 until 2020 and 1.44 by 2025[3]. This implies that in the future, there will be a lesser number of young people paying their SSS contributions and a much larger number of beneficiaries (elderly) claiming their pensions. Thus, an increase in claims of benefits (elderly) but a decrease in the contributions collected (youth) by SSS would result to a shortage in the funds.This also implies that each worker will have to support more retirees under public pension and health care systems.This shortage would give adverse effects in the future such as the increase in the implicit pension debt (IPD)[4]. It is forecasted that the IPD would reach up to P42.76 trillion in 2025 as opposed to 2010’s figure of P6.91 trillion[5]. It implies that the shortage of funds will be added to the burden of the current and future workers.

In conclusion, the SSS at present is at a good situation because the contributions they received is enough to sustain their benefits payout. However, the institution must not ignore the threats such as  demographic change in the country because it poses very adverse consequences if not addressed properly. In order to combat population aging, the country must either sustain a strong economic growth over the next several years or at least develop a strong social system that can provide economic security to the growing number of elderly[6]. With this, SSSshould already think of ways to combat such a threat.


[1] SSS members from Southern Mindanao is 2,170,002[2] Social Security System, Facts and Figures: Contributions, 2012, https://www.sss.gov.ph/sss/index2.jsp?secid=849&cat=6 (accessed July 25, 2012)
[3]NSO and Inter-Agency Technical Working Group on Population Projection,Population projection statistics index, 2004, http://www.census.gov.ph/data/sectordata/popprojtab.html (accessed July 25, 2012)
[4] Implicit pension debts refers to when pension obligations exist but there are no reserved funds to pay them thus the present value of these promises become a liability of the state or government. The state is committing future stream of revenues in order to pay these IPDs.
[5] Pineda, E. (2006). Lessons of the Chilean Pension Reform for the Philippines.
[6] Lee, S., Mason, A. & Park, D. (2011). Why Does Population Aging Matter So Much for Asia? Population Aging, Economic Growth, and Economic Security in Asia. ADB Economics Working Paper Series.




Authors:
Aguila, Philip
Bufi, Pamela
Dimaano, Lorylie
Roces, Lannie





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