Mathematics of mismanaging pensions

It would otherwise be a brazen act of pillaging and plundering pensions and that would be criminal if, indeed, the first order of the day for those entrusted with our money had first and foremost their own monetary interests in mind. 

On the question of brazen greed, it is rather difficult to come to any other conclusion and there should be the devil to pay if, at the end of these controversies implicating officials in a pension-fund mess, the charges filed against nine officials of the Social Security System (SSS) might, in fact, be true should they be proven guilty of the accusations.

Last January 16, amid charges of gross incompetence and betrayal of fiduciary trust, charges of graft and corruption were filed against nine SSS officials. Involving P116,826,265.95 divided among 34 SSS officials, the specific charge was for the “financial abuse of their authority without any sense of propriety nor conscience, and outright dishonesty.”

There is irony in such eloquence. Those charged were charged with protecting the interests of the aging and ailing. Prudence and propriety are required, but conscience is an even higher requisite.

A scant few months following their first year after being appointed to the SSS, Aquino’s officials immediately rewarded themselves handsomely with over P276 million in bonuses for what they deemed as good work.

The recent charges filed against the SSS officials mentioned outright dishonesty. Allow us to look into that by citing SSS data and applying some arithmetic just to see behind and beyond the smoke and mirrors obfuscating this issue.

Two mathematical anomalies confront us. One on deficits. The other, receivables.

Based on documented testimonies presumably presented under oath in both chambers of Congress, SSS officials declared that the resulting fund deficit was P4 billion should pensions increase by P2,000, with an actuarial fund life of 13 years. In giving excuses for his veto, Aquino computed the deficit suddenly now bloated at over P16 billion to P26 billion and projected bankruptcy imminent by 2029. Aquino’s deficit computations are an incredible increase of over 300 percent to 55 percent.

As disturbing as Aquino’s magical mathematics seems, it gets even worse. Employing updated data, a retired university professor computed the deficit as substantially lower than those computed by Aquino. Aquino has similar data, so why does his math result in astronomical deficits?

In 2014, SSS revenues totaled P155.18 billion from collections and investments. Collections are, technically, not revenues, but what the heck. It also had reserves of P418.316 billion. Its comprehensive income was over P46 billion. Netting out benefits, payouts and operating expenses totaling P110.712 billion, its net deficit, should pensions increase by P2,000, would be P10 billion. How did a P10-billion deficit suddenly bloat to P16 billion and P26 billion in Aquino’s computations?

As if Aquino’s math could not get worse, it actually does, ironically. Do the actuarial math. A P10-billion deficit places the actuarial fund life between April and May in 2043, yet the P4-billion deficit presented in Congress placed the same on 2029 or 13 years earlier, exactly as does Aquino’s P16-billion and P26-billion deficits.

Larger deficits result in more proximate bankruptcies. Not the other way around. Someone must be lying.

Aquino’s deficit computations are inconsistent with the audited financial statements of the SSS. And the SSS is itself inconsistent with its own numbers. SSS officers rewarded themselves scandalously high bonuses, yet their collection ratio is only 38 percent and, of the remaining accounts receivables of 62 percent, they brag that their efficiency ratio from collectibles is 88 percent.

Again, do the math. Collecting 88 percent of uncollected 62 percent yields an anemic 55-percent collection-efficiency ratio. In the corporate world, these characters would have been fired.

Really now, are these the kind to whom we should entrust our money?