Philippines pensions face up to default threat
The Philippines’ state pension schemes are in a parlous financial condition and in desperate need of reform, but the government has no money. A private sector solution is available and there is time to fix the problems, but only if politicians leave well alone. Chris Leahy reports.
THE PRESIDENT AND CEO of the Social Security System, Corazon De La Paz, coaxes into life the reluctant air-conditioning system in her half-lit office in downtown Manila. “We have to turn off the air conditioning to save costs,” she says apologetically. “It’s part of the government’s drive against energy price rises.”
De La Paz knows a thing or two about saving money. Since her appointment to the SSS, the Philippines’ mandatory pension scheme for some 26 million private sector workers, she has had to eke out savings wherever she can find them just to keep the fund alive.
“When we joined in 2001, the fund was okay until 2015 and we were very worried,” she says. “But after our reforms and the economic improvement, we were pleasantly surprised. The fund will take us to 2029 without benefit increases.”
Perhaps, but the SSS is hardly keeping up with paying benefits in real terms and, with inflation in the Philippines at around 7%, the scheme is clearly already failing its members. “If we had to pay [benefits] based on the inflation rate, the fund would only last until 2017,” says Eriberto Valencia, a consultant to SSS.