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Let’s
move on The election exercise is over, and yet the bickering – like a nagging flea bite – continues to hound us. Blinded are our politicians to the luster of power that they have become singularly obsessed with clinging to any public post. Meanwhile, concerns that affect everyday life continue to beg for action and resolution. This is perhaps one reason why I chose to be a member of the fourth estate, to try to understand and dissect issues so that these may be exposed and resolved. Completely leaving our fate in the hands of squabbling politicians will certainly lead us to nothing. Let us move forward. With this in mind, I end my two-week hiatus with a review of an issue very close to my heart: the Social Security System (SSS). Once fighting to prevent its own untimely retirement, the SSS now seems to be trekking the road to recovery. After fearing that the state-run pension fund would go broke by 2009 (or 2015, depending on whose actuarial estimates you employ), its 25 million members who have been saving up for retirement day apparently no longer need to despair. Raising employers’ share The one percentage point increase in the employers’ share of monthly contribution rates – which brought total contributions to 9.4 percent from 8.4 percent – is somewhat correcting the fund imbalance resulting from benefits disbursement outpacing contribution collections. This is clearly a case where swallowing the "bitter pill" is worth the pain. As of end-October 2003, while contributions continued to lag behind benefits, the shortfall was narrowed down to P760 million as of October from a hefty P4.96 billion a year earlier. The substantial 80 percent drop in deficit is a clear indication that the pension fund’s financial condition is improving. Contributions in the first 10 months of 2003 reached P32.78 billion, showing an increase of 15.34 percent from comparative figures a year earlier. Benefits, meanwhile, amounted to P33.54 billion, posting only a slight increase of 3.9 percent year-on-year. Going after delinquent employers’ remittances Apart from increasing contribution rates, my e-bug informers tell me that SSS fielded more than 600 account officers to monitor pension fund payment of companies nationwide. As a result, unpaid obligations of delinquent employers that for a time hit close to P5 billion are now on a decline. There is a proposal pending in Congress to condone interest payments on delinquent accounts (a proposal I have discussed in this column a couple of years back). Proponents of this measure think that this will further shore up the fund balance if employers avail of the amnesty. The bill, however, should not encourage future employer delinquency. It should provide SSS with more teeth to go after employers who misappropriate contributions collected from employees. Learning from past mistakes As the SSS imbibes a new breath of life, care must be taken not to repeat past mistakes that resulted in the actuarial crisis. Firstly, let’s watch closely lawmakers, particularly the new ones, lest they be tempted once again to tamper with the SSS pension funds. Let’s put a stoppage on new bills that would seek to increase SSS benefits and perks without making the corresponding adjustment in the contribution rate. This is a populist move that may earn votes during election year, but definitely mortifying for SSS members. Records showed that SSS increased pension benefits 10 times across the board during the last 10 years without any increase in contribution. This consequently threatened the pension fund’s viability. Unwise investments Of course, the lopsided emphasis on raising benefits and retirement perks was only one side of the equation. It did not help that past administrators has been less prudent with their investment decisions. SSS funds were spent to buy stocks of listed firms that ended up as losing propositions. The BW fiasco has been repeatedly mentioned as a classic example. By the way, what happened to those responsible for those highly questionable and irregular SSS investments? And let us not forget how administration after administration also repeatedly took advantage of the pension fund for their own political advances by forcing subsidies on government housing programs. All in all, as of November 2003, SSS had P45.7 billion worth of investments in stocks, P41 billion in housing loans, and over P31 billion in salary loans. Chances are the pension fund would take a hit once its soured housing loans and foreclosed properties are sold at a substantial discount to asset companies availing of the Special Purpose Vehicle (SPV) Act incentives. More proactive investor stance After almost closing the gap between benefit payments and contribution collections, the SSS should now focus on a new investment thrust. SSS needs to think long-term as its investment portfolio is being developed. SSS has substantial holdings in blue chip companies like San Miguel Corp., Ayala Land, Ayala Corp., PLDT, First Philippine Holdings Corp, the energy unit of the Lopez family, and Manila Electric Co., the country’s largest power distributor. Then of course, there is also its 25-percent stake in Equitable PCI Bank that is currently in the process of being sold to the Sy family. With all these substantial equities at hand, the SSS is certainly in a very firm position to stir the direction of most of these companies. It is perhaps high time for SSS to begin to take a more active management stance instead of being a mere passive investor. SSS has a fiduciary responsibility to its members. Keeping their money idle would be a great disservice. And so is going into risky and sub-standard investments. We hope that all the above lessons are crispy clear to Cora dela Paz, who so far has professionally stirred SSS back on track. Would the politicians please get off her back?
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