A more sober regard for BS Aquino’s veto of the SSS pension hike bill

Understandably, a lot of emotion surrounds the issue of how much pension retired Filipinos are entitled to from the Philippines’ Social Security System (SSS). The Manila Times editor called President Benigno Simeon ‘BS’ Aquino III “cruel and heartless” for vetoing House Bill 5842 passed by Philippine Congress to significantly increase SSS benefit payouts to pensioners. Politicians and pundits have weighed in on the issue as well citing the needs of the beneficiaries of this bill and how “long overdue” these measures are.

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Senator Francis ‘Chiz’ Escudero reportedly expressed outrage and called on his fellow legislators to “override” the veto…

The existing monthly SSS pensions, he said, are “without question, not enough for seniors to afford their basic needs like shelter, food and medicine.”

“A decent pension would keep the elderly out of poverty and allow them to complete their life journey with dignity and comfort,” Escudero said.

For his part, President BS Aquino justified his decision explaining that…

The proposed pension increase of P2,000 per retiree, multiplied by the present number of more than two million pensioners, will result in a total payout of P56.0 billion annually. Compared against annual investment income of P30 billion to P40 billion, such total payment for pensioners will yield a deficit of P16 billion to P26 billion annually.

Both sides make good points, of course. The SSS was created to serve as a social safety net for Filipinos. But people should first calm down and frame the issue properly in order to understand why that one argument cannot be regarded without also taking into account the bigger context — mainly around what the SSS really is, and where it gets the money to fund the benefits it pays out.

Firstly, the SSS is essentially a managed fund. It takes contributions from its members, pools these contributions, and invests this pool of funds in the money market. The money it earns from the yield of these investments is ideally what funds the benefits paid out. The SSS is, to vastly simplify, a big state-run paluwagan operation. But unlike a paluwagan operation, it actively invests the funds its members contribute with the aim of generating income, much like a bank does with the money depositors entrust to it.

Second, SSS benefits are not tax-funded. The contributions deducted from an employee’s pay is a distinct line item from the withheld income tax line item. Withheld income tax is remitted by employers to the Philippines’ tax office, the Bureau of Internal Revenue (BIR). Deducted SSS contributions, on the other hand, are remitted to the SSS.

Third, if there is something to be said about how much money is being paid to officers and employees of the SSS, consider the total amount surrounding the magnitude of the impact that the implementation of HB 5842 involves. Considering the 56 billion pesos in pension benefits that potentially have to be paid out annually (not even counting the value of the other benefits), the amounts involved surrounding the “issue” of SSS employees’ pay will likely be no bigger than a rounding-off error when placed in the context of that amount.

So get a grip, people.

Those crying bloody murder over the veto of HB 5842 on the sole argument that the benefits paid out by the SSS are “not enough”, are doing so with an incomplete argument. True to its usual moody style of lazy Twitter-fed “journalism”, Rappler reports how Filipino netizens are now raising a stink using this one-legged argument. Amazingly, though, one featured tweet (fielded by House Representative Luz Ilagan) in that Rappler “report” does properly frame the discussion that we should be having:

It was very much established in committee hearings that SSS could afford the hike in pension. Aquino veto is a big disappointment

Indeed, the debate should revolve around the facts surrounding this question. Did Congress properly evaluate the viability of the proposed benefit hikes from the context of the on-going financial position of the SSS? And if, indeed, the SSS could have afforded those hikes, did President BS Aquino do the right thing vetoing the bill?

This is where the debate should begin — not with howls of girly outrage and self-aggrandising indignation, but with an adult regard for the facts and how those facts connect together to form a clear picture of how the SSS’s broader community of stakeholders will be impacted.

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13 Comments on “A more sober regard for BS Aquino’s veto of the SSS pension hike bill”

  1. You hit the nail right on the head there mr. Webmaster. Increasing the payout from SSS system isn’t like those other outrage fads like sixwillfix or condoms for all. The viability of the SSS is at stake here and really, it is for the SSS chair to come forward with his take on the issue and tell us once and for all if the can afford to cough up the cash. Note further that the SSS fund does not exist mainly for pensioners but also provides a safety net for able bodies workera by providing loans, healthcare, maternity, death etc. benefits.

  2. FYI:

    REPUBLIC ACT NO.8282 – Social Security Law

    “SEC. 20. Government Contribution. ‐ As the contribution of the Government to the operation of
    the SSS, Congress shall annually appropriate out of any funds in the National Treasury not otherwise appropriated, the necessary sum or sums to meet the estimated expenses of the SSS for each ensuing year. In addition to this contribution, Congress shall appropriate from time to time such sum or sums as may be needed to assure the maintenance of an adequate working balance of the funds of the SSS as disclosed by suitable periodic actuarial studies to be made of the operations of the SSS”

    SEC. 21. Government Guarantee. ‐ The benefits prescribed in this Act shall not be diminished and
    to guarantee said benefits the Government of the Republic of the Philippines accepts general
    responsibility for the solvency of the SSS

    1. As I wrote in the article, “The money it earns from the yield of these investments is ideally what funds the benefits paid out.”

      What the above provisions in the law describes is a state subsidy on the performance of the fund. In short it’s a penalty on the taxpayers to compensate for a shortfall in the way the fund is managed.

      1. It is not a response to your post, Beni. Just an FYI on the role of the government when it comes to SSS.

        The provision ALSO allows for the government to subsidize the increase in pension, since it is there in case SSS gets into financial trouble in the future.

        The increase in the pensions is also to be expected since the country had an inflation rate of 4.87 percent per year from 1999-2013.

        I am trying to look for the SSS pension increase history, but only found one last 2014 which was a 5% increase.

  3. Where did the fund managers of SSS go wrong? The deficit is already there but it seems that they didn’t address the problem immediately. I heard Arnold Clavio on the radio suggesting that the investment of the SSS should be publicly reported, and his suggestion is correct. I hope that the FOI bill will be pass into law and that the bill will cover the annual financial report of SSS should be made public. But if it ever becomes a law implementation will be the biggest problem.

  4. Question, has a government SSS system or worked in any country successfully yet? The USA system is in deficit. many countries have cut payments and defaulted on the system all together. The best approach to retirement has always been the same everywhere. Take 10 percent of every paycheck and put in in a savings account or invest it and understand the risks. There is no investment that is guaranteed to make money. The best option is to depend on yourself for retirement, not the government.

    1. Singapore and Australia follow that model. And the funds are managed by professional fund managers in the private sector with the owners of the funds given options to choose which fund manager or financial institution to deposit their deductions. Each contributor also has a unique account ID and provided a report every year that details the performance of her retirement funds in the market.

  5. What some may point out as the mistake of the SSS is failure to invest adequately so that the returns will be enough for increases, but also that if there was a deficit, people supposed to handle it were sleeping. Noynoying, if that is the word for it.

    Otherwise, the other suspicion is that SSS were siphoned off by some officials for use in elections by the Liberal Party.

  6. Aquino has never been poor. He never experienced living from paycheck to paycheck.
    He cannot understand how the poor and the marginalized live. Same as Mar Roxas and the rest of the politicians.

    A 2,000 pesos increase is a US 40. a US $40 can is just the payment of a parking space in New York, U.S.A.

  7. The idea of the social security was patterned of those in the US. It’s the belief that the young workers contributions will outweigh the pensioners, a.k.a the retired ones. But with the global economy going topsy turvy, and the local unemployed outweighs the pensioners then we have a problem.

    Without the healthy influx of hard earned money from the people the SS fund is vulnerable. It was actually never meant to be a safety net.

  8. Paasa (Raising false hopes).

    This in a nutshell sums up and aptly describes the effects of President Aquino’s recent veto of the bill proposing a P2,000 across-the-board increase for SSS pensioners.

    The presidential veto has brought to the fore the serious lapse in the liaison and advisory works of both the Presidential Legislative Liaison Office (PLLO) and the Legislative-Executive Development Advisory Council (LEDAC). For how could such a bill have passed both houses of Congress without the usual Completed Staff Work (CSW) – or whatever term they may wish to call it — that would fairly apprise the President and the members of the legislature as well about the possible impacts – social, political, economic, fiscal, etc. – of key legislative measures under consideration by Congress?

    With such a CSW, the President is given a blow-by-blow account of the actions in Congress and is promptly advised by his subordinates relative to the appropriate decision or course of action to take on certain pending bills and avert, where proper, their being elevated to the portals of Malacañang for final decision by using his innate power of suasion over his allies in Congress. The timely information given the Chief Executive on crucial bills would spare him from being put “on the spot,” so to speak, and effectively shun a situation where members of Congress advocating a bill would earn “pogi points” and gain undeserved political mileage at the expense of an unwary President. That, too, would save Congress hundreds of deliberation hours and, of course, millions of people’s money!

    We thought that the presidential staff learned their lessons well from the 15th Congress (2010-2013) during which period the President vetoed nearly 80 bills submitted to him for signature. Such number of rejections speaks of the kind of coordination and linkage which the executive and the legislature had then. Proposed measures which are unlikely or have a very remote chance of being approved by the President owing to certain foreseeable considerations should, following an extensive research and CSW, be “nipped in the bud” and “dumped outright” at the legislative mill.

    While the SSS bill may be the first bill ever vetoed by the President among those passed by the current 16th Congress (2013-2016), still the recurrence of the old and unpalatable practice by Congress of passing the buck and eventually shifting the burden to the Office of the President at crunch time as well as the oft-laid-back approach and slip-shod treatment by the President’s men of legislative proposals which is akin to a “let’s-just-cross-the-bridge-when-we-get-there” attitude is something to be abhorred and despised.
    That the poor old SSS pensioners were made to believe that the bill would merit nothing less than the approval of their President, it having been given the imprimatur by hundreds of their representatives in Congress, made its rejection all the more painful and difficult to accept by those would-be beneficiaries. The two branches of government should by now have learned their lessons from this sad chapter and should forthwith become more prudent and circumspect in ensuring that what is finally delivered to their constituents are “true and concrete services” and not “paasa lang” or mere “hollow promises.”

    ATTY. ALVIN T. CLARIDADES
    PUP College of Law Faculty
    Manila

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