SOCIAL Security System (SSS) aims to grow its investment income to P71.41 billion by the end of this year, driven mainly by government securities.

This will come from total investments estimated at P1.44 trillion by yearend, with an expected return on investment (RoI) of 6.11%.

At end-June, SSS’ investment income stood at P21.157 billion from an actual investment level of P1.27 trillion and a return on investment of 4.53%.

“I think the key message here is we’re balancing the security of our members with the need to increase returns. It’s a tricky balancing act. You don’t want to be too conservative because then you don’t generate the income necessary to pay for pension. At the same time, you need to get a little more aggressive,” SSS Commissioner Victor Alfonso A. Limlingan said at a briefing on Tuesday.

About half of the SSS’ investment placements are in government securities, which the pension fund views as “stable and secure,” he said. For a pension system that has to meet long-dated obligations, the mix matters: the fund needs enough liquidity and safety to support benefits now and in the future, while also widening its earnings base as its membership and reserves grow.

The state pension fund expects to have an investment level of P724.11 billion in government securities by year-end, with expected earnings of P34.748 billion and an RoI of 6.39%.

That would be higher than the end-June placement of P629.05 billion, which generated actual income of P16.045 billion and a return on investment of 5.43%.

The rest of SSS’ investments are in corporate notes and bonds, equities, mutual funds, and externally managed funds.

It will also set aside P15 billion for its planned foreign investments by the end of this year.

SSS is likewise expanding its real estate investments, with P179.384 billion earmarked by yearend and expected income of P11.763 billion, for an RoI of 6.11%. This compares with the end-June actual investment level of P154.555 billion, earnings of P906 million, and an RoI of 1.32%.

“Many of our members are very young and they won’t need to draw on their contributions until they’re much later on in life… Our best-performing investment, as many of you have probably confirmed, is real estate, [which] tends to go up in value over the long term. Maybe not in a year or two, but if you look at 20 years, and that’s the time horizon we need for our members. Real estate is a stable, good source of returns,” Mr. Limlingan said.

Meanwhile, the state pension fund is also looking to increase the share of loan income in its overall revenues, as these earn more than its government securities investments, he said.

“A big thrust that we’re doing is we’re trying to improve our loan portfolio. Our loans on average earn 200 basis points more than government securities, but they’re almost as safe because they’re secured by their contributions or their pensions.”

This will be supported by the expansion of its SSS LoanLite micro-lending program and its plans to launch a pension loan program.

SSS also reported that its net revenues reached P55.5 billion at end-July from P48 billion as of June.

SSS President and Chief Executive Officer Robert Joseph M. de Claro said this was lower than the year-ago level due to the implementation of the pension reform program.

Members’ contributions rose to P253.33 billion at end-July from P200.32 billion at end-June.

Its mandatory provident fund rose to P263.12 billion from the contributions of 9.16 million members, up from P255.63 billion at end-June from 9.06 million members.

“So, this is the fastest growing fund. It is on the divide contribution scheme and today it’s already one-sixth of our total investable reserve funds,” Mr. de Claro said.

Expenditures reached P7.09 billion at end-July, equivalent to just 24.3% of the pension fund’s P29.22-billion limit. — A.M.C. Sy