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Jan 21, 2022

1% Deferral SSB Could Result In Higher Deductions

The final one percent in social security contributions that was supposed to have taken effect earlier this month was deferred until the new fiscal year, to give people a longer time to prepare for it. But according to the C.E.O. at the Social Security Board, Deborah Ruiz, if those additional deductions from salaries do not take effect by April, there would need to be another restructuring of the scheme soon.

 

Deborah Ruiz

Deborah Ruiz, General Manager, Social Security Board

“A part of the contribution reform – it was in two phases. The first phase was the change to the contribution wage band and the insurable ceiling. So that change has happened but the agreement was for it to be done in three years. And during that three-year period, we were to have the conversation as to what else needed to be done. We have different scenarios that could be contemplated: raising the retirement age; having the employers, for employer, pay the first three days of sickness so Social Security doesn’t cover it. There are even long-term implications of how the fund would be designed. Is it strictly that you want us to pay solely pensions? Or do you want us to continue paying sickness? These benefits have a cost and at the end of the day, it is what the stakeholders are willing to pay. And of course, the government is also contemplating the government pension and whether that needs to be contributory or not so at the end of the day, it will impact our salaries and how much is deducted.”

 

Marion Ali

“What set of funds, if it is, is this deferral or delay affecting? How is it affecting you?”

 

Deborah Ruiz

“Well, in the short term, it won’t because it’s more a strategy in terms of the contribution reform to increase the pension liability so it’s more a long-term impact. If we continue, then the period of equilibrium will be reached sooner rather than later because we have a two-year breathing space.  We have enough funds to cover our short-term, long-term and employment injury benefits. So it’s more in terms of how soon we need to do the reforms before we will reach that point again that we had explain to the stakeholders in 2019. So, instead of four years, this change probably would drop it down to two years that we have a window to do something.”


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