The Social Security System (SSS) just announced what it refers to as a landmark pension reform program beginning September this year.
The program features a structured, three-year increase in pensions for all SSS pensioners, the first multi-year adjustment in the institution’s 68-year history.
According to the SSS, the increases will be implemented in three annual tranches. For pensioners as of Aug. 31, 2025, there will be a 10 percent increase for retirement and disability pensioners in September 2025 and a five percent increase for death or survivor pensioners. For pensioners as of Aug. 31, 2026, there will be an additional 10 percent increase in retirement and disability pensions beginning September 2026 and an additional five percent for death or survivor pensioners. The third and last tranche will be implemented in September 2027 for pensioners as of Aug. 31, 2027 and will involve an additional 10 percent increase for retirement and disability and an additional five percent for death or survivor pensioners.
After three years, pensions will have increased by around 33 percent for retirement/disability pensioners and 16 percent for death/survivor pensioners.
The SSS provided an example of the estimated pension increases over the three-year implementation period. In terms of the minimum rare, those receiving P2,000 as of today as retirement pension will receive the increased rate of P2,420 per month by September 2025, P2,662 by September 2026, and then P2,928.20 by September 2027. For survivorship pensioners receiving P2,000 as of today, they will be getting P2,100 by September 2025, P2,205 by September 2026 and P2,315.25 by September 2027.
Meanwhile, for those receiving the highest retirement rate of P22,137.25 a month, they will be getting P24,350.98 by September, P26,786.07 by September next year and P29,464.68 by September 2027. For survivorship pensions, this will be increased from P20,200 to P21,210 by September, P22,270.50 by September 2026 and P23,384.03 by September 2027.
The SSS pointed out that the reform will result only in a manageable reduction of fund life from 2053 to 2049, offset by stronger cash flows from previous contribution reforms and enhanced collection efforts and will not necessitate any contribution increase.
The reform will benefit over 3.8 million pensioners, which includes 2.6 million retirement/disability pensioners and 1.2 million survivor pensioners, and is projected to inject P92.8 billion into the economy from 2025 to 2027.
While the increase is a much-needed and welcomed development, it leaves much to be desired. If pension benefits are supposed to be the pensioners’ primary income and pension incomes should be able to cover basic health care, social services and long-term care, then even the increased pensions will not be enough.
To live comfortably in Metro Manila, it is estimated that one must earn around P50,000 a month. Even the minimum wage of P695 per day for non-agricultural workers in Metro Manila and P658 for those in agriculture, retail/service and small manufacturing establishments which took effect last July 18, is not enough.
How many of our SSS pensioners are poor? They are no longer supposed to work because they have already retired or are suffering from a disability. The P2,420 per month from SSS will not even be enough to cover the cost of health care, what more for food and other basic necessities?
According to the 2022 Mercer CFA Institute Global Pension Index (MCGPI) which is a comprehensive study of 44 global pension systems accounting for 65 percent of the world population, most retirement income systems in Asia saw overall improvements except for China, Indonesia and the Philippines.
The MGCPI uses the weighted average of the sub-indices of adequacy, sustainability and integrity.
For integrity which considers three broad areas of the pension system, namely regulation and governance, protection and communication for members and operating costs, the Philippines’ retirement income system scored the lowest in Asia and globally.
Singapore is the top Asian retirement income system in the region followed by Hong Kong and Malaysia. Globally, Iceland topped the list followed by Netherlands and Denmark.
In terms of adequacy, there was even a decline for the Philippines from 41.8 in 2023 to 41.7 last year, but an improvement in terms of sustainability from 63.2 to 63.4, and in terms of integrity, from 25.7 to 27.7. The overall score of the country improved slightly to 45.8 out of 100 from 45.2 in 2023, but this was still below the 63.6 global average.
The country’s retirement income system ranked the third worst among the 48 systems in the 2024 report.
Singapore, Thailand and Indonesia received better 2024 overall scores of 78.7, 50 and 50.2, respectively compared to the Philippines’ 41.8.
Sure, the SSS must ensure the long-term financial sustainability of the pension fund and that large or frequent pension increases can jeopardize its ability to pay future benefits. But is this the best that it can provide?
Are our contributions being invested well? How about the compensation of SSS’ top officials and per diems of its board members? Are SSS funds being utilized properly?
Just recently, the Office of the Ombudsman ordered a six-month prevention suspension of a number of executives of the state-pension institution Government Service Insurance System (GSIS) over the questionable purchase of shares in an undercapitalized and losing private energy company.
The SSS charter requires a company to have a three-year profitability track record for the pension fund to invest in it. Is this rule being followed?
The Philippines’ current pension system needs to be evaluated and improved if we are to remove poverty as an obstacle to a secure old age.
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