UNIONS said a proposed pension scheme needs to be established on the basis of voluntary worker contributions, saying that deductions from pay could be too burdensome.
The arguments for employer-only pension contributions were laid out in the House Committee on Banks and Financial Intermediaries, which was discussing House Bill 8938 or the proposed Capital Market Development Act of 2021.
The bill calls for all private-sector employees to have an Employee Pension and Retirement Income (EPRI) Account, to which the employer and employee are required to contribute. EPRIs will also be portable, following the worker throughout his working life regardless of changes in employer.
Trade Union Congress of the Philippines Policy and Advocacies Officer Nicole K. Parreno said worker contributions to their pensions should be voluntary as required contributions will represent a further “burden.”
“The contribution on the part of the employee should be made voluntary because they already have to pay for SSS, PhilHealth, and Pag-IBIG. Any additional contributions taken out of their salaries may be too big a burden to bear,” she said.
“We prefer that the contribution be voluntary for workers with extra savings, even if the contribution is quite low at 1% of base salary… they may still feel this is a burden considering the state of the economy,” she added.
According to the substitute bill as it stood on March 22, the initial contribution for those earning minimum wage or less is 0% while the employer pays 4%. For workers above minimum wage, the initial contributions are 1% for the worker and 4% for the employer.
The committee’s chairman, Representative Junie E. Cua, said voluntary contributions will limit the effectiveness of the pension scheme. In the bill’s current form, employers already contribute more than the workers to their EPRI accounts.
“It’s clear under that arrangement, the employee benefits more… if we make one of those arrangements voluntary or make the other compulsory, it will not be fair. The other might request that both arrangements be voluntary and then we won’t have a program anymore,” he said.
The proposed law gives the power to increase EPRI contributions to the Insurance Commission, after consulting the Department of Labor and Employment and the Department of Finance.
Economic managers have touted the bill as holding the potential to raise workers’ retirement packages while helping the development of the capital markets by raising the pool of investible funds. — Gillian M. Cortez