Solon suggests increasing salary cap to exempt low income earners from paying higher SSS contributions

A lawmaker at the House of Representatives on Thursday said the government should just increase the maximum salary cap of the Social Security System (SSS) (Pictured) from the present PHP16,000 to PHP25,000 instead of implementing a 1.5 percent hike in contribution. (Photo: Philippine Social Security System/ Facebook)

MANILA –A lawmaker at the House of Representatives on Thursday said the government should just increase the maximum salary cap of the Social Security System (SSS) from the present PHP16,000 to PHP25,000 instead of implementing a 1.5 percent hike in contribution.

In a statement, Quezon City Rep. Winston Castelo said the planned increase in SSS contribution rate imposes additional financial burden on low-wage earners and self-paying members and would further diminish their purchasing power.

Castelo suggested increasing the maximum salary cap while retaining the current 11 percent contribution rate, thus allowing high-income earners to subsidize low-income earners.

“The increase in salary cap should be enough to cover the projected financial requirement of the pension increase without burdening low-income earners and self-paying members,” Castelo said.

President Rodrigo Duterte has approved a PHP1,000 increase for SSS pensioners starting this month along with a 1.5 percent increase in SSS contributions to be implemented starting May 2017 and an increase in monthly salary credit to PHP20,000 from PHP16,000.

Castelo, who filed his own version of the SSS measure, also said that before the planned contribution hike takes effect, the SSS must generate higher investment income.

“This means that before the increase should take effect, the SSS must achieve a minimum annual rate of return on its investments. This should be imposed on the SSS to force its management to invest wisely and manage its investments well,” he said.

The Quezon City lawmaker proposed that any increase in contribution will be allowed only if the SSS achieves an annual average return of investment (ROI) of 8 to 10 percent.

Castelo noted that the average return on SSS investments is below 7 percent per year, which he described as “inefficient investing” considering that the state fund firm has almost one-half trillion pesos in investable funds.

As of September 2016, SSS has more than PHP470 billion in investments from which it generated income of only PHP24.6 billion or 5 percent ROI, he noted.

“The fact is, SSS appears to earn more from lending to its own members. It charges its members 10 percent for salary loans plus 1 percent service fee for a total of 11 percent. Housing loans are charged 8 to 11 percent depending on amount,” Castelo said.

“If the average ROI of SSS is 7 percent as it claims, that means SSS is earning lower from its other investments — higher from lending to its members,” he added.