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| Philstar / file photo |
The Trade Union Congress of the Philippines (TUCP) is urging Congress to strengthen the current laws on retirement rather than creating a new private pension system, which, the labor group, said, may cost minimum-wage earners between P140 and P420 of their monthly salary.
Following the hearing on the proposed Capital Market Development Act or House Bill 8939 last Wednesday, TUCP Vice President Luis Corral said strengthening the Social Security System (SSS) and Government Service Insurance System (GSIS) laws are better than creating another monthly contribution pension system amid the increasing unemployment rate due to the Covid-19 pandemic.
“The simulations given by the DOLE for mandatory monthly contributions by minimum-wage earners of from anywhere from P100 to P450 will be a draconian imposition at this time. This amount will be over and above the already large compulsory contributions the worker makes to the SSS, Pag-IBIG and PhilHealth,” he said.
“Since we already have SSS and GSIS, why not just amend the charters of these existing institutions by creating a special investment fund window in both, which allows members of the respective funds who have savings to voluntarily invest these savings in the capital markets through the intermediation of fund managers. The charters of both should be tweaked to provide portability of such investment funds between the SSS and GSIS as the worker goes through the revolving door of transferring from one employment to another through his entire employment life,” he said.
Corral asked to Congress and economic managers to consider existing variables such as massive unemployment, millions of workers on “no work, no pay” arrangements, reduced working hours, job-sharing, low wages and the spiraling inflation rate as key factors in the consideration of the bill.
“We will all grow old, and will need social protection and social assistance, so as part of the process of designing or reforming any pension system, all sectors must be properly consulted,” Corral said.
House Bill 8938, which is now pending at the committee level, cites the portability aspect of the pension fund savings of the employees. The bill aims to reform the pension fund system in order to boost the capital market in the country.
Under the bill, a portable employee pension and retirement income (EPRI) account is created at the start of the employment of the worker.
The bill said both the employee and the employer should be obliged to mandatorily contribute to the EPRI Account. The amount of such contribution, which shall be fair, equitable, affordable, adequate and sustainable, shall be determined by regulatory authorities in an implementing rules and regulations.
Citing Department of Labor and Employment’s simulation, Labor Undersecretary Benjo Benavidez said if a private minimum- wage employee contributes 3 percent of his or her monthly salary, the deduction would reach P420 or P16 per day.
He added if a private minimum-wage employee contributes 1 percent of his or her monthly salary, the contribution would be at P140 or P5 a day. “When it comes to affordability kayang kaya ito ng isang minimum-wage earner. We are still trying to run simulation with different salary levels,” Benavidez said.
Despite this proposal, Benavidez said retiring employees from the private sector are still entitled both SSS and those provided for under the Labor Code of the Philippines through RA 7641 or Retirement Pay Law of 1993 as the proposal only meant to supplement their pensions.
“[With this bill] we are [addressing] the defect of the existing pension provision of the Labor Code brought about by RA 7641 by providing portability and pre-funding [provisions],” he added.
For his part, Dr. Renato Reside of UP School of Economics said the feasible rate for minimum-wage earners is P300 monthly.
“With this bill, we are looking at feasible rate of P300 for minimum-wage earners and P100 for low-income earners,” he said.
For his part, Employers Confederation of the Philippines (ECOP) President Sergio Ortiz-Luis Jr. said the group is supporting the intention of the bill.
“The proposal looks okay with me, I have not seen so far any thing that we’re against with. In principle, we really support it. There’s really a need to rationalize the pension plan, this is one good way to do it,” he said.
Earlier, Ortiz-Luis told the BusinessMirror that the portability aspect of pension fund savings seems ideal “in principle,” saying he supports “anything that will make availment of the pension easier.” Ortiz-Luis said pension fund savings are usually wasted when employees decide to move to another company, saying it would be beneficial if the workers would be able to keep an account where they can continuously pour in their savings.
House Committee on Banks and Financial Intermediaries Chairman Junie Cua said he filed his HB 8938 to provide retirement and pension system that is fully funded, portable, more actuarially fair and stable that will enhance the current pension, at the same time, promoting and encouraging national savings and prudential investments on the part of employees.
“It has its own problems. Foremost of which, is the structure of the law and its implementing regulations. Republic Act [RA] 7641 does not require pensions to be prefunded, hence, pensions are paid out of pocket rather than built-up over the duration of employment, thus, no pool of investible assets is created,” he said.
“The pension benefits do not vest until they are 60 years old and on the last day of their employment. Because pension benefits only vest at their final place of employment, pensions are not portable, and the employee is at risk in the event of the employer’s bankruptcy. In addition, many are working in the informal sector which makes it difficult to enforce pension requirements under the current law,” Cua added.
Young generations
Meanwhile, Capital Market Development Council (CMDC) co-chairman Benedicta Du-Baladad said millennials and Generation Z are expected to benefit from this proposal.
“Based on a study, these people [millennials and Generation Z]…jump from one employer to the other 12 times during their lifetime of 40 years of working. The average of changing their employers is actually 12 times. If we follow the current law now nobody can get a retirement pay,” she said.
“Currently it is given when you are only about to retire and stay with your employer for about last five years and you are at least 60 years old. There is also no requirement for funding so it is a pay as you go and there are so many risks with that,” Du-Baladad said. - By JOVEE MARIE DE LA CRUZ
