A new crusade for de la Paz

Well known in the Philippines for her charitable fundraising, Corazon de la Paz has launched her biggest crusade to date: saving the country’s Social Security System. The 66-year-old head of the SSS, as it is known, says that the fund will run out of money in 12 years. “The system is broke, and it needs to be fixed,” she asserts.

Well known in the Philippines for her charitable fundraising, Corazon de la Paz has launched her biggest crusade to date: saving the country’s Social Security System. The 66-year-old head of the SSS, as it is known, says that the fund will run out of money in 12 years. “The system is broke, and it needs to be fixed,” she asserts.

A Cornell University MBA who ran PricewaterhouseCoopers’ Philippines practice for 20 years, de la Paz is a stickler for precise numbers. She’s asked President Gloria Macapagal-Arroyo to increase monthly contribution rates from 8.4 percent -- 5.33 percent from employers and 3.07 percent from employees -- to 22 percent over the next several years. Only then, says de la Paz, will the SSS be able to fully pay out each of its 23.5 million members. Arroyo has backed the proposal.

“While benefit payments to members have consistently increased over the years, contribution rates were left untouched,” notes de la Paz."We need a pay-as-you-go scheme where contributions rise as benefits rise; otherwise, we are heading for disaster.”

Established in 1957, the SSS is “essentially a partially funded defined benefit plan with a low contribution rate,” says its CEO. Only about a third of its members pay their premiums regularly. That’s one of the main reasons the 165 billion peso ($3.3 billion) SSS lags such fully funded schemes as Singapore’s Central Provident Fund and Malaysia’s Employees Provident Fund.

De la Paz’s role model, however, is farther afield. California’s CalPERS, she says, has “a well-defined investment philosophy and asset allocation strategy, a high degree of discipline in the market and widespread application of quantitative analysis.” She has another reason to admire the giant public fund: It recently agreed to invest in the Philippines again after briefly shunning it because of corporate governance concerns.

Related