The Social Security System (SSS) attained a full-year investment income of P28.65 billion last year while its return on investments (ROI) reached 6.9 percent, outpacing key market indicators such as the 10-year Treasury bond and 364-day T-bill rates which averaged 4.0 percent and 2.1 percent, respectively.
SSS Executive Vice President for Investments Sector Rizaldy T. Capulong noted that the agency’s ROI last year also remained ahead of national economic indicators, particularly the 5.8 percent growth in gross domestic product (GDP) and 1.4 percent inflation rate for 2015.
“Our investment activities are guided by SSS charter and adhere to the principles of safety, good yield and liquidity. SSS performance under present management has consistently outdone major investment benchmarks, and we continue to do our best amid the prevailing market conditions,” Capulong said.
From 2011 to 2015, the SSS annual ROI averaged 9.1 percent, outperforming the five-year annual averages of 5.9 percent for the GDP growth, 4.8 percent for the 10-year T-bond, 3.3 percent for the inflation rate, and 1.8 percent for the 364-day T-bill.
Government securities, the largest contributor to SSS investment earnings at 38.6 percent, registered a 7.1 percent ROI and brought in P11.05 billion last year, improving on the P10.98 billion earned in 2014. Combined income from government securities and equities make up two-thirds or P19.18 billion of the entire SSS investment earnings for 2015.
“Equity investments have been generating good returns for the funds of our members, earningP8.13 billion last year while the ROI reached 8.2 percent despite the 3.9 percent PSEi (Philippine Stock Exchange Index) decline in 2015. Equities accounted for 28.4 percent of our total investment income last year, and remain a major component in our investment strategies,” Capulong said.
Earnings from salary loans amounted to P4.86 billion, higher than P4.79 billion the previous year, on the back of a 7.8 percent ROI. Meanwhile, income from corporate notes and bonds rose from P1.03 billion in 2014 to P1.41 billion last year with nearly a five percent ROI.
The P426.66-billion SSS investment portfolio is currently comprised of government securities (39.9 percent), equities (23.0 percent), salary loans (15.6 percent), corporate notes and bonds (8.0 percent), bank deposits (5.9 percent), real estate (4.7 percent), and housing and development loans (2.9 percent).
“Real estate, while only about five percent of the SSS investment portfolio, contributed P2.2 billion or seven percent of the total SSS investment income last year. Real estate also recorded the highest ROI among the different types of SSS investments in 2015,” Capulong observed.
The SSS, through its investments, supports the government’s economic and social programs such as education, infrastructure, water, communications, power and electrification. The pension fund generated earnings of over P11 billion last year from its investments with the government, which is SSS’ biggest borrower.
“Earnings of about P10 billion came from SSS placements in the private sector, including some P3 billion in stable cash dividends from financial, power and utility companies,” Capulong said.
About 1.5 million SSS members benefited from salary loan releases in 2015 alone, while over 70,000 student-beneficiaries have availed themselves of SSS Educational Assistance Loans as of end-2015.
SSS investment decisions are supervised by the Investment Oversight Committee (IOC) and Risk Management Committee (RMC) of the Social Security Commission, which serves as the SSS governing board and highest policy-making body.
“Functions of the IOC include ensuring our compliance with the SSS Charter’s provisions on the investment of reserve funds, and spearheading the development and adoption of guidelines to ensure transparency in the investment performance of SSS. The RMC, meanwhile, is tasked to ensure SSS’ compliance with risk management policies and practices,” Capulong explained.
Limitations on the SSS reserve funds allotted per type of investment are specified under the SSS Charter, namely 40 percent for private securities, 35 percent for housing, 30 percent in real estate, 10 percent in short and medium term member loans, 30 percent in government financial institutions and corporations, 30 percent in infrastructure projects, 15 percent in any particular industry, and 7.5 percent in foreign currency dominated investments.
“While SSS investments are performing well, even in spite of a down market, these cannot be expected to adequately fund substantial benefit increases such as the proposed P2,000 pension hike, which would require an extra payout of least P56 billion annually, nearly double our entire investment income for 2015,” Capulong noted.