State-run pension fund Government Service Insurance System warned Wednesday that a proposal in Congress to cut the retirement age of government workers from the current 60 years old to 56 could exacerbate unemployment rate and reduce the fund’s life by 12 years.
“The only viable option we see is to do this for new entrants [new members] so that the old pensioners will not suffer,” GSIS president and general manager Jesus Clint Aranas said in a news briefing at the agency’s head office in Pasay City.
“Studies have already shown that it will reduce the fund’s life and reduce job security,” he said.
The House of Representatives committee on government enterprises and privatization earlier approved a bill seeking to lower the optional retirement age among government workers to 56.
The House panel decided to pass the substitute bill, a consolidation of nine measures, proposing amendments to Republic Act No. 8291 or the Government Service Insurance System Act of 1997. The counterpart proposal is also being tackled in the Senate.
Aranas said if the proposal was passed into law, an additional P176.3 billion would be needed to sustain the fund’s life. He said there should also be an increase in contribution rate and decrease in benefits to GSIS members.
Proponents of the bill said the lower retirement age would help the bureaucracy “as it hastens the turnover of government positions to younger professionals, making way for the fusion of fresh blood in public service.”
Aranas said the proposal’s passage into law would result in the “death of GSIS.”
Meanwhile, Aranas said GSIS was considering investing in dollar-denominated bonds after its board had rejected a previous plan to invest $800 million overseas in a multi-asset strategy to raise more funds.
“That is the plan B… to invest in dollars,” Aranas said.
GSIS announced last year a plan to invest $800 million abroad in bid to diversify its investments and not just focus on domestic markets.
“The board declined the proposal and they are not inclined to agree with our recommendation. They feel it is not a good practice to bring some funds overseas,” Aranas said.
GSIS released a total of P12.95 billion in GSIS Financial Assistance Loan since the program started in May 2018, benefitting 36,692 personnel of the Department of Education.
GFAL is a debt-consolidation and balance-transfer facility that seeks to help DepEd workers in settling their outstanding loan balance with accredited private lending institutions. DepEd employees constitute more than half of GSIS’s total membership.
Under the voluntary program, borrowers may apply for a maximum loan of P500,000, which is automatically deductible from their salary and payable in equal monthly installments for six years at a reduced interest rate of 6 percent per annum computed in advance.