Is Paying SSS Contributions Worth It?

In our post titled How to Compute SSS Pension, a reader asked about the amount of her pension if she will pay the maximum SSS contribution of 1,760 pesos for the next 20 years.

Question from Maritess B:

If I pay the maximum amount of 1,760 pesos for 20 years, how much pension will I get at age 60. I am an OFW. I have paid for 7 years already, but not the maximum contribution.
Can I have a sample computation?
I have paid for 7 years, and then I stopped. Now I want to continue contributing for up to 20 years. So all in all, I will be contributing for 27 years. Isn’t it that you’re computing pension only for 10 years? Can I get back my contributions for the excess years of 17 years as a lump sum?

Answer:

First, I should say that the result of my computation is only an estimate.  I am basing my computation only on published SSS guides. So ask SSS for accurate computation.
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If the maximum contribution at the time you retire is still 1,760 pesos and if the maximum salary credit is still 16,000 pesos, then we can safely assume that your Average Monthly Salary Credit (AMSC) when you retire will be 16,000 pesos, since you said you’re going to pay the maximum contribution for the next 20 years.

We can also safely assume that your AMSC for the last 60 months prior to your semester of retirement will be 16,000 pesos.

Your excess Credited Number of Years (CNY) will be 17 years, assuming that you correctly counted your previous years of contributions.

We will use Formula No. 2 in the How to Compute SSS Pension article:

300 pesos + 20% of AMSC + (2% of AMSC x Excess CNY)

300 pesos + 20% of 16k + (2% of 16k x 17)

300 + 3200 + (320 x 17) = 8,940

Your monthly SSS pension will be 8,940 pesos.

Regarding your question about whether your contributions for 17 years will be given in lump sum:

Your contributions for your excess number of credited years (17 years) will NOT be given
in lump sum. Your contributions for 17 years will be included in the computation of your pension.

What is that SSS lump sum I keep hearing about?

A lump sum retirement benefit is given to members who retire with less than 120 contributions.  It is equal to total contributions plus interest.

The lump sum for new pensioners is like a cash advance. If you’re a new pensioner, you have the option of getting a lump sum, which is actually an advance of your first 18 months of pension. You get your lump sum, but you will get your next pension after 18 months.

Now the next question is: “Is it worth continuing contributing to SSS for the next 20 years?”

Let’s say that you will pay 1,760 pesos for the next 20 years (240 months), so your total contribution will be:

1,760 pesos x 240 monts = 422,400 pesos

Let’s assume that you paid a total of 84,000 pesos for the 7 previous years that you mentioned:

1,000 pesos x 12 months x 7 years = 84,000 pesos

The total of all the contributions you paid to SSS over 27 years is 506,400 pesos.

422,400 + 84,000 = 506,400 pesos

Is paying a total of 506,400 pesos worth it?

At what age will you be able to get back your 506,400 pesos?

Assuming you will get a monthly pension of 8,940 pesos starting at age 60,
you will be able to recoup your payment of 506,400 pesos at around age 65.
Pension paid in 1 year = 8,940 x 12 = 107,280

506,400 / 107,280 = 4.72 years (4 years and 9 months)
If you will live until age 85, then you would have earned more than 2 million
pesos as total interest of the money you paid to SSS.

8,940 x 12 months x 20 years = 2,145,600 pesos

There are also other SSS benefits like salary loans, maternity benefit, sickness benefit, disability benefit and funeral benefit.

There is also an educational loan program, although it’s out of funds right now, and a housing loan program, although the Pag-ibig housing loan program is more popular and more accessible.

How about if you will not live long to enjoy your pension for many years?

If you pass on to eternity while a pensioner and you have primary beneficiaries (your spouse and children younger than 21), your primary beneficiaries will receive your monthly pension.

If you do not have primary beneficiaries, and you pass away within the first 60 months of your pension period, your secondary beneficiaries will receive a lump sum, which is equal to the balance of your pensions for 60 months (60 minus number of months already paid for x monthly pension).

Here’s a computation made by SSS, part of its publication The Value of SSS Membership.

SSS-membership257-155

 

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