News Flash

July 29, 2015, Wednesday
  • Bayan Muna Party-list Rep. Neri Colmenares urges Pres. Aquino to certify as urgent the Anti-Dynasty Bill. 7 hours ago |
  • Kabataan party-list Rep. Terry Ridon says Makabayan bloc stands by its actions during Pres. Aquino's SONA. 7 hours ago |
  • QC Rep. Winston Castelo says the House Ethics Cmte. should probe Makabayan bloc’s ‘unparliamentary behavior’ in session hall during SONA. 7 hours ago |
  • MMDA to hold metrowide earthquake drill on Thursday beginning at 10 am. 7 hours ago |
  • Abad says the P 3-trillion nat’l budget for 2016 is P 394-billion or P15% higher than the 2015 budget of P 2.6-trillion. 7 hours ago |
  • House Appropriations Cmte. Chairman Isidro Ungab says his committee will begin the budget hearings on August 10. 7 hours ago |
  • Budget Sec. Florencio Abad submits to the House of Representatives the proposed national budget of P 3-trillion for 2016. 7 hours ago |
  • Suspended Makati Mayor Junjun Binay asks CA to hasten the decision on Ombudsman’s suspension order against him. 12 hours ago |
  • 9 PNP officials bag promotions. 12 hours ago |
  • Deles hopes Congress will pass BBL by October before its members get involved in election-related activities. 12 hours ago |
  • Rep. Rufus Rodriguez expresses confidence on the passage of proposed BBL at the plenary in August. 12 hours ago |
  • Sen. Chiz Escudero also resigns from Joint Congressional Oversight Cmte. on Public Expenditures. 12 hours ago |
  • UNA Spokesman Mon Ilagan says VP Binay will deliver his own SONA any day now. 12 hours ago |
  • UNA says Aquino’s criticisms vs. Binay at SONA was 'un-statesmanlike' but they still respect the President. 13 hours ago |
  • PCCO Sec. Sonny Coloma says it was the President’s decision to make his SONA a long speech. 13 hours ago |
  • Sen. Jinggoy Estrada says his detention over PDAF charge is an example of selective justice & not gov’t drive vs. corruption. 13 hours ago |
  • Sen. Jinggoy Estrada says Aquino should not count the 3 senators’ detention as part of his administration’s accomplishments. 13 hours ago |
  • Teachers’ Dignity Coalition dismayed when Pres. Aquino did not annouce any salary hike for teachers during SONA. 13 hours ago |
  • Fmr. First Gentleman Mike Arroyo says Pres. Aquino’s report on textbooks and classrooms were all lies. 13 hours ago |
  • Fmr. First Gentleman Mike Arroyo says Pres. Aquino’s last SONA was self-serving, lacking in content & full of propaganda. 13 hours ago |
  • Fmr. First Gentleman Mike Arroyo says Pres. Aquino hit Mrs. Arroyo again at SONA because he lacked accomplishments. 13 hours ago |
  • Belmonte has no plans of castigating 7 Makabayan bloc members after they flashed anti-Aquino banners after SONA. 13 hours ago |
  • Belmonte admits he was embarassed when House Makabayan bloc booed Pres. Aquino after he delivered his SONA. 13 hours ago |
  • Sen. Chiz Escudero says he resigned from Finance cmte. chairmanship so that budget deliberations won’t be affected by talks on politics. 13 hours ago |
  • Sen. Chiz Escudero resigns as chairman of the Senate Committee on Finance. 13 hours ago |

Straightway deterioration into a Ponzi scheme

By Horace Templo | Feb. 15, 2013 at 12:01am
By now, the hullabaloo about Manuel Amalilio’s Aman Futures, the latest Ponzi scheme and pyramid scam, has escalated to the point of even souring our country’s friendly diplomatic ties with Malaysia.

But consider the U.S. Securities and Exchange Commission’s standard definition of a Ponzi scheme: “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.”

Doesn’t this definition place Social Security System into their class? While these scams have voluntary “investors” and promised “returns”, SSS has mandatory “contributors” and defined “pensions.” We have to reassure ourselves that SSS is not of the same kind.

Now a pay-as-you-go system, SSS finances current obligations from current contributions. Many members are not able to contribute enough for their own benefits. These are being paid out of the contributions of young, healthy and non-child bearing members. Who do you think paid for the first pensions of the 1960s?

The continuous inflow of contributions must therefore be promoted. The true solutions—collection efficiency, contribution rate increase, administrative economy, and benefit reduction—are, unfortunately, difficult to achieve.

SSS administrators have occasionally resorted to gimmicky Band-Aid solutions that provide only short-term relief. The favorites are the contribution and loan penalty condonation programs that provide immediate cash flows, but give rise to higher benefits and loan applications later. The enrolment of low-income workers who would selectively pay just enough to qualify for pensions is hailed a success for universal coverage, not realizing that this type of coverage is a load too heavy for other members to carry.

A Ponzi scheme collapses when the required fresh money from new investors stops, and old investors cash out. This could have also happened to SSS during its formative years when contributions could be withdrawn, and sickness,  disability and death claims were filed ahead of the regular cohorts of old-age pensioners. SSS easily weathered this crisis.

Correcting this flaw, SSS discontinued early withdrawal of contributions. Workers and employers now have to continue remitting contributions even at times when the SSS is unpopular.

Victims of Ponzi schemes continue to be duped so long as they believe that they would eventually receive their handsome returns, ignorant of the schemers’ real financial conditions and where the promised returns would come from.

Salary loans are popular, but because of their high administrative costs, they have been giving SSS negative returns. To stay viable, SSS augments contributions with incomes from investments in stocks and fixed income securities. At times when yields were high, SSS earned more investment income than it received contributions. This was accomplished by Administrators Gilberto Teodoro in 1983-1986, Jose Cuisia Jr. in 1986-1990, and Renato Valencia in 1990-1993.

We observe, in fairness to most of now-bankrupt pre-need plan companies, that they were established as legitimate financial ventures, not as Ponzi schemes. However, when they started failing to meet financial targets, and deluded investors of their true conditions, they unwittingly transformed themselves into Ponzi schemes.

Victims of Ponzi schemes are not protected by law in our financial system of “caveat emptor.” Fortunate are the SSS members whose full benefits are guaranteed by government. In any serious sign of impending trouble, reforms would be immediately imposed to correct faults. Financial resuscitation is provided if necessary. Then confidence would return.

But the Department of Finance, the manager of government guaranties, sometimes over-reacts. For instance, it took hook, line and sinker the premature World Bank’s prescription that SSS must privatize to avert an impending worldwide old-age crisis. The WB later corrected itself and recalled this prescription.

Let us be clear. Surpluses and deficits are the bottom line of the interplay of factors that constantly change. These factors are wages and unemployment rates; sickness, maternity, and disability benefit claims; longevity and mortality rates; investment returns in stocks, fixed-income securities and member loans; and operating expenses. They make the required contribution rate fluctuate up and down.

But at present, a low-income member is allowed to pay P104 monthly for 10 years for a total of P12,480. He then qualifies at 60 years old for a lifetime monthly pension of P1,200, totaling P312,000  in 20 years. This is a return of 2,400 percent!

If the SSS drive to enroll hundreds of thousands of tricycle drivers were anchored in this kind of mathematics, then no intricate analysis is required. It will surely drive itself into insolvency. It first must raise the minimum contribution.

Meantime, beneficiaries cannot be denied a decent pension level and efficient and accessible decentralized services. Failing to do so, SSS would be no different from any Ponzi scheme reneging on its promised returns, and would soon collapse.

SSS must now raise its meager pensions while building up a modest reserve fund, courageously ask contributors to increase their contribution rate and minimum and maximum salary bases.

We must recognize the essentiality of SSS in our lives. As every Filipino must be its beneficiary, every capable one must also agree to carry the pension load of those who could not pay for it.

Else, this public pension scheme would straightway deteriorate into another bankrupt Ponzi scheme.
COMMENT DISCLAIMER: Reader comments posted on this Web site are not in any way endorsed by Comments are views by readers who exercise their right to free expression and they do not necessarily represent or reflect the position or viewpoint of While reserving this publication’s right to delete comments that are deemed offensive, indecent or inconsistent with editorial standards, may not be held liable for any false information posted by readers in this comments section
comments powered by Disqus

Want Updates?

Be the first to know on what is latest from, simply enter your email below to get started. We don’t spam dont worry!