SSS Contribution: Is it worth paying the maximum rate?
For working-class Filipinos, the Social Security System (SSS) represents the best form of insurance or fallback. It provides a security net in case of illness, disasters, or financial problems.
An even bigger benefit is the retirement pension, which is a sure source of “income” during retirement years.
Of course, this is not all for free. Many employees are automatically deducted their SSS contributions every payday, so they don’t have any control over it. But there are also lots of voluntary members who are faced with a choice.
Should one pay the maximum possible SSS contribution? Would it be worth it?
SSS’s Pension Policies
SSS computes the pensions of its members based on the provisions of the Social Security Law. This is based both on the number of a member’s contribution, as well as the total amount of the contributions that have been paid.
- SSS computes the average of all these contributions from the date of the person’s coverage as a member.
- Or, it can also compute the average of the member’s contributions for the last five years.
Whichever is higher will then be used for the pension computation.
What does this mean for the SSS contributor?
First, note that for the pension, SSS computes for either the average of all contributions since the person became a member, or the past 60 months before the contributor retires.
This will cause many people to think of paying just the minimum required contributions for the first years, then jack up the contribution to the maximum during the last 5 years of employment.
By this reasoning, it will cause SSS to act on the period with the higher average contribution.
It is to be noted that the monthly allowable contribution is computed from the declared earnings of the individual member. This means that the member can theoretically “manipulate” his declared earnings to change the value of monthly contribution.
For example, Johnny earns around Php 15,000 every month in his self-styled job. He decides to contribute voluntarily to SSS on his thirtieth birthday, and pays only Php 110 every month.
Five years before he retires (on his sixtieth birthday), he jacks up the contribution to the maximum Php 1,760 a month. This nets him a pension of Php 9,900 every month.
On the other hand, his friend Mark decides to be a voluntary SSS member on the same day and contributes the maximum Php 1,760 a month from the very beginning.
Before he retired, he would have paid a total of Php 633,600. This is Php 495,000 more than what Johnny contributed.
Yet, by this logic, he would still only get the same pension of Php 9,900 a month.
But here’s the thing…
While the above example would seem like a clever move, there is one big problem — SSS does not allow massive jumps in the member’s contributions.
The system is built with specific policies meant to prevent the undue increase of contributions, especially prior to retirement or similar contingencies.
SSS Contribution Table
SSS strictly follows a contribution table that prescribes the maximum amount a person can pay depending on his income level.
For example, those earning roughly Php 1,000 a month can pay a maximum of Php 110 as contribution. While a person earning Php 15,000 and over can still pay this amount and stay an active member, he cannot simply jump to the maximum contribution.
Increase in SSS contribution
Under SSS Circular No. 2015-007, a self-employed or voluntary member (including an OFW and non-working spouse), who is 55 years old and above:
- can only increase his/her MSC (monthly salary credit) only once in a given calendar year
- and by one salary bracket only from the last posted MSC.
For Employed SSS members:
If both Johnny and Mark are employed members, the basis of their contributions/MSC is their actual compensation. Therefore, it is not possible for them to just choose any MSC or change to a higher MSC.
For Self-employed or Voluntary SSS members:
Since Johnny (in the example above) is self-employed or a voluntary member and was only paying P110 until he reached 54 years old, he can only increase his SSS contribution to P165 at age 55; P220 at age 56; P275 at age 57; P330 at age 58; and P385 at age 59.
He cannot jack up his contribution from P110 to the maximum P1,760 at age 55 or above.
Also under SSS Circular No. 2015-007, it is stated that a Self-employed or Voluntary member, who is below 55 years old, shall be allowed to change his /her MSC without limit in frequency and in number of salary brackets in a given calendar year.
If this is the case, then Johnny can actually jack up his SSS contribution from P110 to P1,760 at age 54 and receive the highest possible pension if the computation will be based on his average contribution from the last 5 years or 60 months before he retires.
Watch the video below on how this topic was covered by ANC on the Money with Ms. Salve Duplito.
At 5:02 of this video, Ma. Luisa “Louie” Sebastian, Assistant Vice President for Media Affairs of the Philippine Social Security System, said:
“If you will only consider PENSION, then probably that’s the way to go. You will increase your contribution rate 5 years before you retire.”
Therefore, if you really want to maximize your SSS contribution for your SSS Pension / retirement benefit alone, then you may pay the maximum SSS contribution only 5 years before you retire.
Other SSS benefits
Like what SSS has been stressing out, Pension isn’t the only draw of contributing to the SSS, though it is certainly the biggest.
- In case of sickness or periods of maternity, SSS can provide considerable amounts to qualified/covered members.
- Such is also the case during disability or death, with SSS doubling as an insurance system.
- In times of financial need, SSS members can avail of a loan.
- There are also special benefits in the case of calamities.
Each of these other benefits have different computations — but a good part is based on the amount of SSS contribution. A self-employed person who pays the maximum amount suited for his monthly earnings can get a lot more in benefits than someone who just pays minimum.
For example, in our Johnny vs Mark example, Mark would be eligible for a much higher salary loan owing to this levels of contribution.
After six years, for example, he can loan as much as Php 32,000 versus Johnny’s Php 2,000 pesos.
In the event of sickness, Johnny can only get Php 29.99 as his daily sickness allowance — a far cry from the Php 479.99 per day that Mark will get.
So, is it worth it paying the maximum SSS contribution?
In my opinion, YES, it’s definitely worth it!
It is important to pay the maximum monthly SSS contributions as long as you can afford it. This will ensure that you can take advantage of as much benefits as possible.
You’ll never know when sickness, or some unforeseen circumstances may strike. And that is exactly what SSS is for.
Other Alternatives to SSS
But, remember that self-employed and voluntary members also have various other options.
There are some private insurance companies that have packages similar to the benefits of SSS. Of course, they generally have more restrictive terms than those of SSS. Their policies may also be different, with the potential benefits of the pensioner dependent on the survival of the company.
But they are still an option.
In the end, it will be up to you to carefully weigh the pros and cons of each. Regarding the matter of voluntary SSS contributions, there shouldn’t be any question. Go all in. Pay the maximum if you can.
You may also watch this video courtesy of ANC On the Money on When to Pay the Maximum SSS Contribution.
Click here to read: 7 Steps for SSS Online Registration