Filipino women sending money back home to support their families at UAE exchange branch in Satwa. A Filipino rights group in the UAE has launched an online petition to junk a controversial remittance draft law that would compel them to send money to their legal dependents or risk non-renewal of their passports. Image Credit: VIRENDRA SAKLANI/Gulf News archives

Dubai: If you're an overseas Filipino worker (OFW) who wants to invest now in a relatively risk-free investment scheme, you've come to the right place.

We will share with you a number of relatively risk-free ways to start making money on your money — through SSS Flexi-Fund, Pag-Ibig MP2 and Retail Treasury Bills. 

All of these are sound investment schemes. We'll explain why we claimed they're sound or "relatively risk-free" later. But just a quick one: these are all state-guaranteed. Meaning: presidents — or revolutions — can come and go, but your money stays. 

This is a quick guide on the Flexi Fund (FF), based on some of the most frequently-asked questions.

But just to be clear: regular contributions to the SSS are required before an OFW is allowed to earn by contributing to this fund. 

Following are some of the basic questions and answers about the SSS (Social Security System) Flexi Fund.

1. What is Flexi-Fund?

Launched in 2001, SSS Flexi Fund is SSS + Provident Fund rolled into one.

As a provident-fund-cum-pension-scheme, it allows you to build up your nest egg for use upon retirement, in emergencies or to supplement the benefits under the regular SSS program. 

As an OFW, it is best that you contribute first to the regular SSS program before jumping into the Flexi Fund scheme. 

But once you sign up, you do get decent annual earnings as Flexi Fund investor, in addition to regular dividends — and in addition to your regular SSS membership benefits.

2. Is Flexi Fund mandatory?

No. It is voluntary.

3. It is open to OFWs?

Yes. Whether you were recruited in the Philippines by a foreign employer, a permanent resident in other countries, someone with a source of income in a foreign country, or an OFW who found overseas employment on your own (like those who went to another country on tourist/visit visa), you're eligible to become an Flexi Fund investor.

The key is to become an SSS member first, or reactivate your membership, if you had inadvertently neglected it after leaving the Philippines. It is also open to self-employed Filipino migrants, especially if you're thinking of retiring back home.

4. How much do I contribute each month?

You must first become a maximum payer of SSS monthly contributions (P1,760 per month or Dh120.73). Any amount beyond that in increments of P200 ($3.73, or Dh36.80) is automatically posted to your Flexi Fund account.

There's only one receipt for both. Talk to your nearest SSS-accredited remittance centre or Social Security officer on payment details.

5. Can I open an SSS Flexi-Fund where I am?

Yes. In fact, this fund is designed specifically for all OFWs. Go to your nearest SSS office or accredited remittance centre. 

6. How can I enroll with the Flexi Fund?

To enroll, download the Flexi-Fund application form

Once enrolled, you can start paying your contributions to your Flexi Fund or you can also pay it when remitting your SSS monthly contributions. You need not pay for Flexi Fund contributions separately from your regular monthly SSS contributions.

7. What is the minimum investment amount?

Any amount, not lower than P200 ($3.73), paid in excess of an OFW's maximum monthly contribution to SSS amounting to P1,760 (Dh120.57 or $32.82) will automatically be posted to your Flexi Fund account and will start earning a minimum of 4 per cent per year.

This means that you have to first pay the maximum monthly contribution of P1,760, marked in red, below, to qualify as Flexi-Fund investor.

If you remit Ph1,960 to SSS each month, the extra Php200 (excess of Php1,740 monthly contribution) automatically goes to your FF account. 

If you remit Php100,000, then Php98,240 goes to your Flexi-Fund account, and only Php1,760 goes to your regular SSS monthly contributions.

8. What is the age limit for Flexi Fund investors?

You must be an OFW who is not over 60 years old.

9. Can I apply for Flexi-Fund even if I did not work in the Philippines and have no SSS number?

Yes. But then you have to apply first as a regular SSS member and pay your monthly contributions. The SSS Flexi Fund is offered for all OFWs, whether or not they were members of the SSS in the Philippines.

10. What are the benefits of SSS Flexi Fund?

The fund offers a number of benefits to investors: (a) Tax-exempt and guaranteedearnings; (b) Computed based on average rates of SSS’ short-term placements or 91-day Treasury Bills, whichever is higher; (c) subject to quarterly re-pricing, thus reflecting current market conditions in the Philippines; and (d) earnings are credited every month-end (compounded interest).

11. What is AIB?

It stands for Annual Incentive Benefits. AIB offers additional benefits to qualified members (the higher the investment, also known as "equity", the higher the AIB amount). It means that when you save or add funds to your Flexi Fund account, the money will be invested on growth stocks, T-Bills or short term fixed-income instruments.

And unlike other investments, the fund is almost risk-free, as earnings are guaranteed. Earnings are then distributed, based on shares to total equity of all qualified members.

Although Flexi Fund was launched in 2001, the AIB programme was launched only a few years ago — to encourage OFW investors to maintain and increase retirement savings with SSS.

In short, members with no full Flexi Fund withdrawals and benefit claims within the applicable year are eligible for AIB.  

12. Is there a termination fee if I withdraw my money?

Yes. You can withdraw your funds anytime you want or when you need them urgently. However, there is a pre- termination fee if contributions stayed on the fund in less than one year.

13. How much money do I make with Flexi Fund?

Four per cent is the guaranteed rate of return: or Php8 for every Php200 (Dh13.7) contribued.

This is just the minimum income. In addition, as mentioned above, it also offers an AIB component, which is set depending on the fund’s year-end net income.

AIB is automatically posted to your account if you did not file withdrawal claims/benefit for the year. 

14. Where is the Flexi Fund invested, who are the managers?

The fund is invested by professional managers in stocks, bonds and Treasury bills. One benefit of having full-time professional fund managers looking after you interest is that they are paid to track the markets closely — with the best tools at their disposal every trading day — to optimise earnings for you. They are also rated according to their performance against other fund managers.

15. How can I use my Flexi Fund?

There are three ways you can use your SSS Flexi Fund:

(a) Withdraw: you can withdraw your funds anytime you want or when you need them urgently [a pre-termination fee applies if contributions stayed on the fund in less than one year].

(b) Annual Incentive Benefits (AIB): this may be declared depending on the fund’s year-end net income with automatic posting of AIB amounts to accounts of members without full withdrawal claims/benefit for the year.

Our take on AIB: This makes FF really "flexible", because AIB potentially makes Flexi-Fund at par with Unit Investment Trust Funds (UITFs), Mutual Funds (MFs) or other such co-mingled funds. But only Flexi Fund offers guaranteed 4% earnings. UITFs of MFs don't. This would mean that if you have a Php1 million Flexi Fund account, you have guaranteed earnings of Php40,000 per year (or Php400,000 if you invested Php10 million). Moreover, AIB could potentially augment this.

(c) Retirement, Disability and Death benefits: this may be disbursed in monthly pension, lump sum or combination of both when the neede arises.

16. How many people have invested in Flexi-Fund?

As of June 2016, more than 47,000 OFWs have contributed to the Flexi-fund. In 2001, total members’ equity then was only about Php532 million ($9.9 million).

In 2014, there were 37,612 OFW investors who qualified for annual incentives benefits (AIBs). In 2015, the SSS has disbursed a total of P13.15 million in annual incentives to more than 40,000 OFWs enrolled in its Flexi-fund Program.

As you can see, as this is a voluntary scheme, those numbers are a few drops in the bucket — there are an estimated 500,000 OFWs in the UAE alone, who remitted $2.54 billion in 2017 (and $32 billion or Dh120 billion globally). 

It means that the $9.9 million total Flexi Fund equity mentioned above accounted for less than one-half of 1 per cent of the total remittances of UAE-based Filipinos. It's one stark evidence that most of the OFW remittances go to consumption.

The Flexi Fund, or even basic SSS membership, cannot be made mandatory for OFWs as no law exists mandating it.

With many expat Filipinos now awakening to the reality of being joining the ticking "pension timebomb" party — in which many OFWs will face the prospect of paupery when they hit retirement age with no pension — the size of members' equity in FF or similar schemes, can only be expected to grow.

We have no data yet from SSS on the Flexi Fund members' equity growth or any spike in the number of investors as of end-June 2018, but will share it as soon as it becomes available.

17. Is investing in Flexi Fund better than day-trading in the stock or foreign exchange (forex) market?

Flexi-fund and day-trading in stocks/forex are two radically different investment schemes.

Flexi Fund is managed and guaranteed by the government, but stocks/forex are usually run by private entities.

Flexi Fund is designed as a long-term investment scheme for OFWs to achieve their financial security.

There are other platforms (online and through fund management firms) for day trading or short-term stocks trading. We'll discuss this in another post.

18. What if Flexi Fund is mismanaged or goes bankrupt?

Unlike other investments, Flexi Fund earnings are state-guaranteed.

Even in the case of mismanagement, or bad investment decisions, SSS as a state-owned agency created by law (Social Security Act of 1954, amended by Republic Act No. 8282 in 1997) is guaranteed of continued existence by the state (i.e. Filipino taxpayers).

SSS earned Php146.17 billion in revenues as of September 2017, and booked profits of Php11.91 billion.

The agency has never gone belly-up or needed government bail-out since its founding in 1954 (it officially started operations in 1957).

19. What's Flexi Fund's upside?

First, the SSS Flexi Fund, now 17 years old, is run like a private investment house, but with state guarntees — which is almost like a risk-free vehicle for your long-term investments and retirement fund.

Second: It shows a state-run provident fund can bring out a lot of good. So far, it has proven to be a great scheme and a real wealth generator for members. 

Third: Philippine legislators could use the nearly two decades of SSS Flexi Fund's run to get clarity in crafting a law — or President Rodrigo Duterte/his successor could sign an Executive Order — that would make a similar state-guaranteed mandatory national Provident Savings Program (PSP) for Filipino expat workers. No such mandatory fund exists for OFWs at the moment.

20. What about the downside?

For all its great benefits, Flexi-Fund has inadequacies, too. For one, only OFWs are allowed to sign up. This is a bit of a bummer. Why not open it also to millions of Filipino workingmen and women in the Philippines, too, even for the self-employed crowd? 

Surely, they should also be given the option of investing like OFWs do.

21. Why not make Flexi-Fund mandatory?

The 1954-era law that created SSS, as well as the subsequent amendment, provide no legal basis to make membership in the Flexi-Fund mandatory.

In other words, if SSS makes it mandatory, that would be illegal.

OWWA membership, on the other hand, is mandatory for all OFws. But OWWA members (who pay a $25 mandatory fee covering one overseas work contract) only get maximum benefits — like death, burial, repatriation — if they die too soon, or face disasters.

OWWA's so-called "livelihood" loans offer palliatives at best, or false hopes at worst, due to their insignificant value (up to $400) that evaporate in a month or less.

22. Why make savings mandatory for OFWs?

There's no way around it. A forced savings scheme means saying "no" to unnecessary expenses today, in order to say "yes" to necessary expenses tomorrow. 

The mission of every OFW going overseas for long stretches of time is to earn dollars. We already know the story, though: When an OFW earns $100, he and his loved ones also spend $100 — if not more. 

When an OFW grows old or infirm and not deep in debt, he would be lucky indeed.

However, any respectable country's financial health for its so-called "modern-day heroes" cannot be simply put down to luck.

23. What would a Flexi-Fund type mandatory OFW provident savings program (PSP) do?

Here's the deal if – or when — a future PSP is made mandatory: 

First: It would stem a "retirement timebomb", where hundreds of thousands of Pinoy expat workers reach old age and retire with nothing.

Second: The creation of the national PSP — patterned perhaps after the SSS Flexi Fund or Singapore's Central Provident Fund (CPF) — is the next big thing for any Filipino leader.

Why? It would answer the cry of thousands of OFWs who are unable to say "no" to their loved ones' every wish (good life, great holidays, gadgets, etc.). 

Third, if the right ingredients are put in place for this NPSP, we think that the power of SSS Flexi Fund would, at the minimum, be multiplied a thousand-fold.  

Fourth, as long as any retirement scheme for OFWs like the Flexi Fund remains "voluntary", tens of thousands of OFWs will fall through the cracks — and are sure to face paupery when they are old and infirm.

Fifth, liquid and investible wealth built by OFWs could potentially match even the size of SSS itself or Singapore's CPF, which currently has 3.86 million members and a balance of $368 billion (savings accumulated in all members' accounts).

Finally, it would create a kind of virtual sovereign wealth fund (SWF) built by the blood, sweat and tears of OFWs.

It could potentially emulate the wealth funds of countries like Norway and most Gulf nations. Those funds grew through years of sound management of proceeds from their mineral (oil) wealth, or people's savings in Singapore's case.

The Philippines, though the country is highly mineralised (oil, gas, gold, silver, copper, nickel, etc), has no soverign wealth fund of its own at the moment. There's only been talk, going on for years, about creating one.

A national provident saving program, pattered after the SSS Flexi Fund, for you and me as expat Filipinos, offers a clear and present opportunity.

Building an SWF is the most-open secret and the key — to the growing wealth of many nations, even those that are mineral-poor like Singapore. SWFs invest commercially, not politically. They follow the money.

For Filipino expats facing paupery upon retirement today, more than at any other time, the SSS Flexi Fund experience provides a template that outlines the key ingredients for creating a new kind of national wealth fund. 

24. What can I do as as OFW to make it happen?

Write, message your Congressman or Senator to support the bill that will create an OFW Provident Savings Program or something similar to a mandatory SSS Flexi Fund for OFWs. 

(Story updated as of July 3, 2018. For information on specific cases, please contact SSS )