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In quest for sustainable social protection

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Social insurance institutions: Strengthening social protection

Among the other sectors, the poor are more vulnerable to the risks and shocks of volatility in the global market. In the Philippines, consistent decline of poverty incidence has been observed in the recent years. From the recorded 25.2% in 2012, it significantly decreased to 21.6% in 2015, according to the Philippine Statistics Authority (PSA).

Although the country has been successful in reducing the poverty rate, there is still an urgent need for effective and well-targeted social insurance programs that help all Filipinos — especially the poor — move towards the sustainable direction.

The Asian Development Bank (ADB), an international development finance institution dedicated to reducing poverty in Asia and the Pacific, explained that social insurance programs mitigate risks by providing income support in the event of illness, disability, work injury, maternity, unemployment, old age, and death.

Key sectors that may serve as entry points for strengthening sustainable social insurance schemes include financial sector development, health, and public sector management, the regional bank added.

In the country, the Government Service Insurance System (GSIS) and Social Security System (SSS) are the agencies tasked in administering social insurance programs. The GSIS administers the social security schemes for workers in the public sector, while the SSS handles the programs for workers in the private, professional and informal sectors. Both the GSIS and SSS schemes are financed by contributions from employers and employees.

The GSIS insures its members against the occurrence of certain contingencies by providing them social security and financial benefits. The GSIS’ principal benefit package consists of compulsory and optional life insurance, retirement, separation and employees’ compensation benefits.

To assist its members with their financial needs, the agency also offers the following loan products: Enhanced Consolidated Salary Loan (ConsoLoan) Plus, Policy Loan, Enhanced Emergency Loan, Pension Loan and Pensioners Emergency Loan.

Currently, the GSIS contribution rate is equal to 21% of the member’s monthly compensation and is shared by the member and the government agency at 9% and 12%, respectively.

According to its 2016 annual report, the GSIS’ total assets continue to become bigger, reaching more than a trillion pesos in 2016. The life of its fund remains stable at 34 years or until 2049.

“Our net income rose 17.94% to reach P54.77 billion compared to P46.44 billion the prior year,” the report said.

In addition, the GSIS released P87.08 billion in social claims and benefits and a total of P34.80 billion in various loans for more than 1.1 million members and pensioners in the same year alone.

Meanwhile, the SSS promotes social justice and provides protection to its members and their families against the hazards of disability, sickness, maternity, old age, death and other contingencies resulting in loss of income or financial burden through its various benefits and programs. To meet its members’ short-term credit needs, the agency also provides cash loans.

The current SSS contribution rate is 11% of monthly salary credit not exceeding P16,000. It is being shared by the employer and the employee at 7.37% and 3.63%, respectively.

For self-employed and voluntary members, they pay 11% of the monthly salary credit based on their monthly earnings declared at the time of registration. For OFWs, the minimum monthly salary credit is pegged at P5,000. And for the non-working spouse, the contribution will be based on 50% of the working spouse’s last posted monthly salary credit but in no case shall it be lower than P1,000.

In 2016, the total assets of the SSS reached P476 billion brought forth by the significant growth in members’ contributions that reached P144.4 billion in 2016, up by nine percent (9%) from 2015 levels, according to its 2016 annual report.

Amid the robust growth of the Philippine economy during the year, total investment income of the SSS rose by 2% on a year-on-year basis to P30.1 billion thereby reversing the decline posted in 2015 and yielding a return on investment (RoI) of 6.6%.

The report added that the benefit payments also grew in 2016 by 18% as the agency finally released about P11 million to selected pensioners arising from adjustments in their pensions as contributions for the years 1985 to 1989 were updated.

Behind the remarkable growth of the GSIS and SSS, these two social insurance institutions still face challenges — particularly in its sustainability — as the growing needs of its members continue to rise.

In response, the GSIS plans to invest $800 million abroad this year as a part of the multi-asset strategy to take advantage of diversification and opportunities for higher returns.

The SSS, on the other hand, is seeking for the approval of President Rodrigo R. Duterte to raise the members’ contribution rate to 14%. The need for higher contributions became in need as the agency’s fund life shortened due to the P2,000 increase in the monthly pension of retired SSS members, of which P1,000 per month were already being disbursed to pensioners since March last year. — Mark Louis F. Ferrolino