Aquino short on social compassion

People fall in line at the Membership Assistance Center of the Social Security System (SSS) Building at East Avenue, Quezon City. INQUIRER PHOTO /RAFFY LERMA

CANBERRA—In its twilight, the Aquino administration is battered by the tempestuous backlash over social policy—his veto of a legislation seeking to increase the pensions of 2.15 million members of the state-run Social Security System (SSS), which handles the pension fund of workers in the private sector.

The storm came as President Aquino, a scion of the country’s largest landed estate (the 4,000-hectare plus Hacienda Luisita in Tarlac province), prepares to step down from six-years in power after the national elections in May.

The veto of the last major legislation on social policy during his administration defines his legacy.

Shooting down the proposed law marks the Aquino presidency as a political reformer short on social compassion and insensitive to the welfare of the poor, disadvantaged and low-income groups in Philippine society.

If the pension-increase policy took place in parliamentary systems with extensive welfare state programs, as in Western Europe, Australia and New Zealand, such a deficit in social legislation would have sparked calls for a change of government or a vote of confidence in parliament.

The worst thing that happened was that the administration has been receiving heavy flak, with disappointed pensioners calling the President “heartless.”

The proposed law, House Bill No. 5842, provides for P2,000 across-the-board increase in SSS monthly pensions.

Trickery

The President deflected the fallout with trickery by playing off groups of SSS pensioners against one another. During a trip to Bulacan province last week, Mr. Aquino explained the reasons for the veto. He said it was unfair to grant the increase at the expense of other SSS members.

“While 2.15 million members will be delighted, the other 30 million will be at risk. Is that right?” he said during an interview on state-run Radyo ng Bayan.

Presenting himself as a statesman, he said: “As the father of the nation, you shouldn’t look only at what is needed now. You also have to plan for the needs of the country in the coming years. So, I am heartless now but in 2007, when the SSS becomes bankrupt [and is not able to pay for the pension of] more than 30 million members, they will call me careless and heartless at the same time.”

Rattled by the backlash from the rank-and-file members of the SSS, officials of the ruling Liberal Party expressed alarm over the impact of the veto on LP candidates for President, Vice President, senator and representative in the May elections.

The backlash sent Malacañang twisting in the wind to explain and justify the veto.

In his veto message sent to Senate President Franklin Drilon and House Speaker Feliciano Belmonte Jr., Mr. Aquino said that while the House bill seeking the pension increase would benefit the private sector retirees, “we cannot support the bill in its present form because of dire financial consequences.”

He said the P2,000 across-the-board increase with the corresponding adjustment of the minimum monthly pension would result in substantial negative income since the proposed increase for each retiree multiplied by the present 2.15 million pensioners would result in a total pay-out of P56 billion annually.

Compared against the 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.

Zero by 2029

“Given this situation, the SSS will be constrained to draw from and use its Investment Reserve Fund (IRF) to support the pension increase. Consequently, the IRF will diminish over the years, eventually zero by 2029. The stability of the entire benefit, whose present membership comprises about 31 million people, will be seriously compromised in favor of 2 million pensioners and their dependents,” the President said.

In view of these considerations, he said, he was forced to veto the bill. As if this explanation is not already protesting too much, the Palace delivered another lecture. A Malacañang spokesperson said it was the responsibility of the government to ensure that all its obligations to 31 million SSS members could be met.

Contrary to criticisms that the President was insensitive to the needs of retirees, the official said, “It would be the height of irresponsibility and lack of compassion” if the administration adopts the bill that could shorten the life of the pension fund.

At least, it was a relief that the Palace did not drag this time “daang matuwid” (straight path governance) into the discussion.

Bonuses defended

The Palace official also took the occasion to deny the issue that SSS funds were being spent on excessive bonuses of SSS executives, noting that the bonuses were just a fraction of the total operating expenses of the pension fund.

SSS executives joined the chorus of explanations. The SSS president and chief executive officer, Emilio de Quiros Jr., said an increase in pension “would have consequences for both the 2.15 million current pensioners and 31 million SSS members.” He said the P2,000 increase would lead to a projected deficit of P26 billion for 2016, from an expected income of P41 billion.

“As the number of pensioners grows, the initial P56 billion in additional benefit outlay per year would increase, which in turn would contribute to the rising annual deficit or net loss incurred by the SSS,” he added.

If the bill had been signed into law, SSS funds, projected to last until 2042, or 26 years from now, would be wiped out by 2029, or in 13 years, De Quiros said.

Even without an increase in pension, the SSS claimed that in terms of absolute value, it was providing members a generous return of P6 to P15 in benefits for every peso they contribute to the SSS.

The message is clear to pensioners: Forget increase in pensions.

But at the same time, SSS commissioners will continue to receive their fat bonuses as reward for prudent management of members contribution to the provident fund.

There is such a taskmaster and slave hierarchy in the SSS pyramid.