The state-run Social Security System (SSS) has said the increase savings rate for higher retirement benefits in the contribution schedule, as stated in the newly-signed Social Security Act of 2018, will be implemented starting April 1, 2019.
Based on the new law, contribution rates will increase to 12 percent from the current 11 percent starting the second quarter of the year, and the adjustment of the minimum and maximum Monthly Salary Credits (MSC) to P2,000 and P20,000, respectively.
SSS Officer-In-Charge Aurora Ignacio said it is high time to adjust the contribution rates and Monthly Salary Credits of SSS to allow members to save more for their retirement.
“We all want a comfortable retirement and to do that, those who are in their productive years must work hard to save more. SSS is the cheapest and most accessible pension scheme. All workers, regardless of nature of employment, must save in the pension fund for their future retirement years,” Ignacio said.
Ignacio said that along with the contribution increase, the Monthly Salary Credit will be adjusted to a maximum of P20,000 which will increase the amount of benefits and privileges of members.
“The good news is that those who will save more with SSS under the new maximum Monthly Salary Credit of P20,000 will have higher amount of benefits and loan privileges as the Monthly Salary Credit is one of the main factors used in the computation of benefits and loan privileges. For example, a member whose monthly salary is P20,000 and has paid 12 contributions in the 12-month period before the semester of contingency of sickness will enjoy P600 in sickness benefit per day from the current P480 per day,” Ignacio added.
Similarly, another member who has paid the minimum 120 contributions at the old maximum MSC of P16,000 will have a basic monthly pension of P6,400. If the member pays under the new maximum MSC of P20,000, the member’s new basic monthly pension will increase to P8,000.
SSS said that the 1 percentage-point increase in contribution is reasonable, citing as an example an employee who earns a salary of P10,000. The current personal monthly contribution of P363.30 will increase by P36.70 to P400.00 while, the employer will now pay P800.00, an increase of P63.30 from the current P736.70 employer-share.
The law is also expected to generate an additional P31 billion for the pension fund as it imposes the implementation of a gradual increase of monthly contributions from the current 11 percent to an additional 1 percentage point starting this year, until it reaches 15 percent in 2025, and the gradual adjustment of the minimum and maximum MSCs.
It will also add 13 more years to the fund life of the SSS up to 2045 upon full implementation of the law by 2025.
The new law, Republic Act (RA) 11199, which repealed RA 1161 as amended by RA 8282, aims to strengthen the pension fund through its salient features such as the rationalization of the powers of the SSC—the policy-making body of the SSS—to allow it to expand the investing capacity of the pension fund to generate better income for the benefit of its members and pensioners.
“We hope that our members will understand the importance of adjusting contributions to make sure that the pension fund remain strong and viable for the current and forthcoming generations,” Ignacio concluded.