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

January 15, 2016

by benign0

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 needsof the beneficiaries of this bill and how “long overdue” these measures are.

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 isideally 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 anincomplete 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.

http://getrealphilippines.com/blog/2016/01/a-more-sober-regard-for-bs-aquinos-veto-of-the-pensions-increase-bill/