Albay 2nd district Representative Joey Sarte Salceda has vowed that he would find ways to reduce the unfunded pension liabilities of the Social Security System (SSS), which its officials estimated to be at P4.3 trillion as of early 2021.
Unfunded pension liabilities or reserve deficits are the amount of all the pensions that the SSS has to pay all its current contributors, minus the contributions and income it expects to generate, Salceda, House of Representatives Ways and Means committee chairman, explained.
“The problem doesn’t hurt yet, because we still have a very young workforce who exceed our pensioners. But it’s our duty as lawmakers to solve this now rather than hurt our children in the future,” Salceda said on Friday, March 26.
“And I still dare dream that someday, the SSS pension will be similar to that of countries like those in Europe that meet the retirement needs of its workers. At the very least, let’s aim for something like the Singapore model that covers all of the essentials for retirement – housing, healthcare, living expense.” he added.
Salceda called officials of the SSS, the Bureau of Treasury, and the Department of Finance (DOF) for a briefing on what the House tax panel could do to solve the SSS’s pension liabilities.
SSS Chief Actuary Edgar Cruz told the lawmaker the perpetual unfunded pension liability of the state insurer is currently around P4.3 trillion, and is under constant pressure due to proposals to increase pension benefits.
“Once the SSS contribution increases are implemented, plus the proposed incremental private pension contributions, our payroll tax would be at around 29 percent for subpar benefits. Singapore’s is at 37 percent but their provident fund covers everything. We need to do so much better,” Salceda said.
One solution Salceda proposed is to allow the SSS to manage private pension accounts under the proposed Capital Market Development Act, which Salceda’s committee is also rethinking. Under Salceda’s proposal, the SSS will be allowed to compete with the private pension providers on managing these funds, and fees charged will be added to its investment reserve funds.
Salceda is also considering having the Bureau of Treasury offer long-term bonds with guaranteed rates of return to the SSS, to manage some of the variability in their bond returns.
“Definitely, we will have to increase both current income streams and contributions. We must resist the temptation of legislating entitlements without securing proportional funding sources,” Salceda said.
In the 1990s, Salceda was a fund manager.
“As a senior citizen, this should no longer my problem. The young will pay for my pension. But as a senior lawmaker, this is my problem. We lawmakers are only worth our salary if we will try to address future problems early,” he said.