SSB Warns of Tight Future Despite Surplus

The Social Security Board is projecting a healthy surplus for the next few years, but that won’t last forever. A recent valuation shows that by the end of the decade, rising retirement rates will push the fund into what’s called a ‘period of equilibrium’, where income and expenses break even. That means no financial cushion. Acting CEO Jerome Palma says another increase in contributions might be on the horizon, unless job numbers go up and investment returns improve.

 

Jerome Palma, Acting C.E.O., Social Security Board

“What we have is an increase in terms of our overtime expenditure. People are naturally going into retirement age, so we will have more people that are retired. More retirees means more payout of the fund. So if we don’t make adjustments overtime we will not be able to meet that. At the current structure and set up it means we are stable enough for the next few years that there does not need to be an increase to the contribution rate to allow us to meet the increase in the retirement benefit payout that we anticipate. So it is a correlation. The period of equilibrium is that tipping point, the point where the benefit expenditures matches the contribution and investment income. It is like that ceiling. So the contribution reform adjustment allowed us to continue on that upward trajectory to push the ceiling a bit more, move the timetable a bit more down. In layman terms, the expense and the income equivalent and then there has to be an adjustment in the contribution. The last assessment or trial valuation has indicated that at the end of the decade, around 2028, 2029. Obviously that is subject to change because if you get an improvement in the investment income, or have more improvement in the administrative efficiency, that is why the digitization is so important, more administrative efficiency means you will be able to carry out the same function within the same pool we have. So we are targeting the growth of the economy, whether or not we have more people employed who can contribute to the growth of the scheme, that also will have a positive effect in terms of our contribution revenue and moving down the period of equilibrium.”