The Social Security System (SSS) will require structural reforms such as a contribution rate hike or an increase in the statutory cap for SSS contributions to improve its Fund life.
Based on latest actuarial valuation, SSS funds regained a life of four years from the previous valuation of 2039 as a result of the increase in contribution rate and monthly salary credit ceiling that took effect in January 2014.
Shortly after the new contribution rate was adopted, SSS pensions were raised by five percent in June that same year causing a one year decrease in the Fund life, which is now projected to last until 2042.
“What has to be done immediately are structural reforms. Our investments have been performing remarkably well despite the low interest rate environment, but we can only invest and earn so much. If the contribution rate remains unchanged while benefit payments continue to swell, the SSS’ reserve fund will be exhausted by 2042,” SSS Chief Actuary George Ongkeko, Jr. said.
Meanwhile, SSS President and Chief Executive Officer Emilio S. De Quiros, Jr. dismissed earlier reports that SSS will deploy a portion of its investment reserve funds abroad, although cites its possibility if it is line with the SSS law’s basic principles of “safety, good yield, and liquidity.”
“We are evaluating all available investments options allowed by the SSS Charter that can generate the highest yielding returns on our investments. At the moment, we are strengthening our position in the local market. While investing abroad is an option, it is still under study.” De Quiros said.
The SSS law sets the prescribed ceilings for select instruments, institutions or industries where the agency can only invest. Section 26 of Republic Act 8282 prescribes cumulative ceilings for the SSS reserve fund as follows: 40% in private securities, 35% in housing, 30% on government financial institutions and corporations, 30% in real estate related investments, 10% in short- and medium-term member loans, 30% in infrastructure projects, 15% in any particular industry, and 7.5% in foreign-currency denominated investments.
SSS has over P428 billion in investment reserve funds as of April 2015, allocated in government securities at P155.3 billion; corporate notes and bonds, P29 billion; member loans, P76.8 billion; bank deposits, P44.6 billion; equities, P103.9 billion; and real estate properties, P18.6 billion.