Duterte approves costly pension hike
2.2 million private sector pensioners to get 1,000 pesos more each month
MIKHAIL FLORES, Nikkei staff writer
MANILA -- President Rodrigo Duterte gave the green light on Wednesday to a significant pension increase for private sector retirees, making good a bold campaign promise on an issue ducked by his predecessor.
Duterte approved an average 31% monthly increment of 1,000 Philippine pesos ($20.17) for 2.2 million pensioners within the Social Security System (SSS), a state-owned enterprise that covers the private sector. A separate fund, the Government Service Insurance System, exists for government workers.
During his campaign, Duterte vowed to make good on a congressional recommendation that there be a 2,000-peso increment to the basic SSS monthly pension. His predecessor, President Benigno Aquino, vetoed the increase and warned of "dire financial consequences".
A second 1,000-peso raise is planned for 2022. To fund some of the increase, SSS will increase monthly contributions by 1.5%. More than 900,000 employers and 34 million employees pay into the fund, and SSS officials have said they will improve collections.
Average SSS pensioners receive 3,273 pesos per month within a range of 1,000-18,000 pesos.
Spokesperson Ernesto Abella said on Wednesday that President Duterte is seeking to fulfill "a social contract with the Filipino people, especially the elderly and the poor who gave the best years of their lives in service".
Duterte's economic managers said SSS will have to pay out an additional 32 billion pesos annually to cover the increase. The president last month seemed to be wavering on his campaign pledge, but has now preempted any accusations of a flip-flop. Since 1980, contribution rates have only been increased three times, while pensions have risen 22 times.
An SSS study showed implementing the rate increase reduces the fund's actuarial life from 2042 to somewhere between 2025 and 2028. SSS had reserves of nearly 470 billion pesos at the end of September.