Revival of GSIS, SSS stock program pushed
The Philippine Stock Exchange (PSE) will request the Government Service Insurance System (GSIS) and Social Security System (SSS) to revive a loan program to fund members’ stock market investment—but this time linked to a voluntary retirement savings program sanctioned by the Personal Equity and Retirement Account (Pera) Law.
PSE president Ramon Monzon said in a recent press chat that the reactivation of the stock investment loan programs—first introduced in the early 1990s during the market boom that preceded the Asian currency turmoil—could help infuse more liquidity to the stock market at this challenging time.
“I’m trying to convince them to restore that stock investment loan to boost liquidity,” Monzon said.
He acknowledged that the loan programs had been shelved by the state-owned pension funds in the past because they were unprofitable.
“The way it was structured before was [that] if you bought shares, you have to buy it in the name of SSS in trust form,” Monzon said.
But there were many shares that the pension funds were not able to retrieve, resulting in losses.
In the case of the GSIS, it introduced in 1994 the Stock Purchase Financing Program, in which an active member could apply for a loan equivalent to as much as five times the monthly basic salary. This could be amortized by the member, but the loan should not exceed P100,000. Pensioners were entitled to a loan equivalent to six times the monthly pension but not more than P10,000.
Members and pensioners who availed themselves of the program could repay their loans through sale of stocks, cash payment before maturity and deduction from any benefit due the member or pensioner following separation or retirement from the service or death.
In 2011, the GSIS embarked on a condonation program to clean up its records and unload nonperforming loans.
Typically, personal finance experts advise against borrowing money to fund investments. But this time around, Monzon believes that such a loan program could be better structured to fund long-term equity investments, and in a way that would be more viable for both pension funds and their members.
“We are trying to see how we can tie this up with Pera,” Monzon said.
The Pera law was passed in 2008 to encourage the establishment of provident personal savings plan.
Resident Filipinos are now allowed to put in as much as P200,000 per year, while those who are based overseas can invest up to P400,000 per year. This voluntary retirement savings program is intended to supplement state-based pension plans and employer-sponsored retirement plans.
“We should push the companies to institute Pera for their employees,” Monzon said.
Monzon said he would try to get approval for the stock investment program at the next board meeting of the PSE board.
The passage of the Capital Markets Efficiency Promotion Act (CMEPA), Monzon added, was another game changer.
The CMEPA allows Filipinos to build up more funds under Pera with the grant of a 50-percent additional tax deduction to private employers that contribute an amount equal to or greater than their employees’ contributions.
“Actually, that’s very good for companies that have 200 or 300 employees,” Monzon said.
