Mr. Reyes came to Riyadh and became an OFW sometime in 1999 after working for private sector in the Philippines. Since then, he has stopped paying his SSS contribution. In total, he made 19 payments or a total of P9,996 after working for a year and a half in the Philippines.
The purpose of this article is to help Mr. Reyes decide whether or not he should continue his SSS contribution after he became an OFW so he could receive pension at age 60. As of now he is 45 years old.
Social Security System (SSS) is mandatory for all of those who were working in the private sector in the Philippines. Whether we like it or not, monthly contributions were deducted from our salaries. The good thing about it is that the employer shares in the contribution. It is gratis money given to employees. That is, if the employer remits the contributions. (It is worst if the employer deducted from your salary for supposed contribution and the employer not only did not match your contribution, but your personal contribution was not also remitted as well). To be able to receive pension, an employee has to make a total of 120 monthly contributions or equivalent to 10 years of monthly payment.
For OFWs who has stopped paying contributions when they work abroad, they may still pay for those periods when they missed their contributions as a voluntary member. But Mr. Reyes did not opt for this option.
After eighteen years of being an OFW, he decided to look at the issue.
If he is to continue paying his contribution to receive pension at the age of 60, he is to pay for 101 more months or a total of P110,110 broken down as follows:
- P110 (minimum contribution) x 41 months = P4,510
- P1760 (maximum contribution) x 60 months = P105,600*
*The maximum contribution only matters during the last five years of payment as it will be the basis for the computation. Thus, the minimum contribution of P110 before the last five years.
As per SSS policy on computation of pension for those who completed the 120 contributions:
- The sum of P300 plus 20 percent of the average monthly salary credit plus two percent of the average monthly salary credit for each credited year of service (CYS) in excess of ten years; or
- Forty percent of the average monthly salary credit
It looks like this:
|P16,000** (maximum monthly salary credit) x.20 (20% average monthly salary credit)||3, 200|
SSS Contribution Table for 2018
** Based on the SSS Contribution Table for 2018. The monthly salary credit if you pay the maximum total contribution.
He will receive a monthly pension of P3,500. The first 18 months of it will be paid lump sum for a total of P63,000. Thereafter, he will receive P3,500 per month.
***The amount will be slightly higher if he continues to pay until he becomes 60 years old because of the additional 2% average monthly salary credit for each CYS in excess of 10 years.
His total contribution of P120,106 (P9,996+P110,110) will be recuperated in less than 3 years of receiving the monthly pension of P3,500.
If Mr. Reyes would live long, which we all hope he would, he will receive more than he has contributed.
To Be or Not To Be
Let us go back to the question whether or not Mr. Reyes should continue paying for his SSS.
Upon showing this to Mr. Reyes, he decided not to continue with his SSS payment. But wait, his circumstances is different from most of us. Let us hear him out.
He plans to retire three years from now at age 48. (Thanks to Saudization). He plans to pursue his plan of starting his own business. As to whether or not he would be gainfully employed to pay P1760 per month after his retirement, is something that he does not want to bother himself at this point. He even countered that if he is not expecting pension from SSS, the more that he would push himself to do good at his planned business.
He would rather put his P110,110 in stock market. His investment in the stock market earned him 100% in a span of five years. He will just add this amount to his stock investment.
He also has insurance in one of the reputable banks in the Philippines which would guarantee him a lump sum payout of P684,503 at age 60 or more if he delays taking out his money. The same insurance company also provides for death benefit to his dependents.
By the time he is 60, he will no longer have a minor child who will be eligible for 10% of the monthly pension from SSS.
Everyone’s case is different. Many of us may have contributed more than what Mr. Reyes has contributed and that it would be a waste not to continue. What of the matching contributions from our former employers which would go to naught.
Aside from the monthly pension, children who are less than 21 years of age are also eligible for dependent’s allowance aside from Dad’s or mom’s monthly pension.
There is also a 13th month pension every December. You can still buy the queso de bola, just like when you were employed.
Retiree pensioners are also entitled to Philhealth hospitalization (if they have contributed 120 monthly to Philhealth).
The primary beneficiary will be entitled to 100% monthly pension upon the death of the pensioner.
Another good thing about SSS is that the monthly payment is very minimal that it would hardly affect the monthly budget. We may pay on a yearly basis every time we go home for vacation. Or ask one reliable family member to pay for our monthly contribution regularly.
Whether or not we continue paying SSS depends on one’s circumstances and earlier preparations made for retirement.
But it is always good to do the math.
The author came up with this article with the help of Ms. Fely Aspiras. Kudos to her.