THERE have been some online discussions recently about how Social Security System (SSS) retirement pensions are computed after it became a topic in a television program. It couldn’t be avoided that SSS pensioners compare the amount of their pensions, and often these discussions lead to questions about how their retirement pensions were computed and what the difference is between someone who contributes minimally over someone who pays based on the maximum salary credit. Let me take this opportunity to illustrate theoretically the cases of two retirees, Mr. A and Mr. B, as follows. But let me cite first some relevant policies.
The SSS law provides for three ways to compute pensions and the highest resulting amount is the one granted to the claimant. The first method is P300 plus 20 percent of the average Monthly Salary Credit (MSC) plus 2 percent of the average
MSC for each year in excess of 10 years. The second method is 40 percent of the average MSC. The third method: Minimum guaranteed pension of P1,200, if credited years of service (CYS) is greater than 10 years but less 20 years, or P2,400 if CYS is at least 20 years.
As can be observed from these methods of computing the pension, the critical factor is the MSC: The higher the MSC the higher will be the pension amount.
The monthly contribution of a member is based on actual compensation for an employed member or the declared earnings for a self-employed or voluntary or overseas Filipino worker (OFW) member. Changes in the MSC are governed by policies to avoid antiselection such as undue jacking up of contributions prior to a contingency such as retirement.
Based on the SSS Circular 2015-07, a self-employed or voluntary member (including an OFW and non-working spouse), who is 55 years old and above, can only increase his or her MSC only once in a given calendar year and by one salary bracket only from the last posted MSC, except if:
- He or she is changing membership type from employed or self- employed to voluntary or OFW for the first time; and
- There is a higher maximum MSC under a new schedule of contributions, provided that he or she was paying at the maximum MSC under the immediately preceding schedule of contributions. Any changes thereafter will be governed by existing rules.
Going back to Mr. A and Mr. B, if both are employed members, the basis of their contributions and MSC are their actual compensations so it is not possible for either of them to just choose any MSC or change to a higher MSC. It’s a different story if Mr. A was employed and Mr. B was self-employed or a voluntarily paying member. The matrix below shows the differences in their computed benefits.
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For more information about the SSS and its programs, call our 24-hour call center at (632) 920-6446 to 55, Monday to Friday, or send an e-mail to member_relations@sss.gov.ph.
Susie G. Bugante is the vice president for public affairs and special events of the Social Security System. Send comments about this column to susiebugante.bmirror@gmail.com.