Pension-hike veto prudent | Inquirer Opinion

Pension-hike veto prudent

12:02 AM January 19, 2016

I AM one of the senior citizens who would like to see a pension increase, but I am not surprised that President Aquino vetoed the proposed law mandating the SSS to grant a P2,000-monthly pension increase.

With the elections on the horizon, Congress members want to earn brownie points with the pensioners. But they did not provide financing for the increase, which is a basic requirement for a sustainable contributory pension system such as the SSS.


The increase would cost P56 billion in the first year of implementation alone, increasing by 10 percent every year as the number of pensioners increases. The SSS would have to cover this amount from savings—what remains of revenue from contributions and investment earnings after expenses for benefit payments and cost of operation—which is about P36 billion for 2015. The remaining negative balance of P20 billion will be drawn from the SSS investment fund now amounting to P450 billion. As the investment fund decreases, income decreases. In 13 years, the SSS Investment Reserve Fund will be exhausted. The SSS will not be able to pay the pension increase and the pensions based on the current level of benefits. In short, the SSS will be bankrupt.

By vetoing the flawed pension increase law, the President is returning the law to Congress for a redoing, the way a professor returns a badly written thesis to a lazy student. If the intent of Congress is to increase pensions by P2,000 from an average of a P3,100 pension, or an increase of 63 percent, the proper thing to do is for Congress to raise the contribution rate to 15.5 percent from the current level of 11 percent. But this is easier said than done. The SSS managed to get employers and employees to agree to the last increase of contribution rates in 2014 after several years of effort by two successive SSS commissions.


The SSS pension increase is not a simple issue. Sen. Juan Ponce Enrile, who cast the lone negative vote on the proposed increase, succinctly defined the issue: “[T]he delicate question that we must consider is how do we responsibly address the needs of our present constituents while protecting the welfare of future generations?” The challenge, however, is not insurmountable as there is a wealth of pension studies from around the world. Unfortunately, Congress simply ignored these.

There are many changes in the SSS law that Congress should remedy to address three fundamental goals of expanded coverage, increased meaningful benefits and sustainable financing. While Congress must act without delay, these changes cannot be rushed. These will require thorough and comprehensive study, a substantial period of debate arriving at a national consensus, and a timeframe for reform implementation.

Finally, that the President should take the lead appears to be a vital ingredient for a successful social security reform as in the case of Roosevelt (SSS—United States), Lula (universal social protection—Brazil) and Obama (Affordable Care Act).

Therefore, the next president and the next Congress should place in their priority agenda a comprehensive social security reform whose elements include increased pensions, sound financing, and higher coverage and collection rates. Absent any one of these, social security reform will be hobbled and unsustainable.

—IBARRA A. MALONZO, member, Social Security Commission, (the views expressed herein are his own)

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