Dubai: Alvin Acerden, 40, has spent the last 18 years as an overseas Filipino worker (OFW) here. In those 18 years, the father of one from Pasay City has not contributed to the Social Security System (SSS), a retirement fund in the Philippines.

He does not need to. It's not obligatory for OFWs to pay their SSS contributions.

Acerden (see video below), who first came to Dubai in 2000 at the age of 23, currently works for a Dubai facilities management company.

He is a poster boy for the tens, possibly hundreds, of thousands of OFWs who dropped out of the state-owned pension system as soon as they flew out of the Philippines.

The result may be potentially army of OFWs hitting retirement age, and going home — without social security. 

No doubt, overseas work lifts millions of Filipinos out of poverty.

But this situation also poses a conundrum: how to turn remittances from being a sign of underdevelopment into a tool for development.

To his credit, Acerden has promised to reactivate his social security status, after the interview for this article.

Some say the falling-off-SSS phenomenon is just a symptom, i.e. that most OFWs are now saddled with a ticking pension "timebomb".   

The following is a Q&A where we cite reasons why this is so:

1. Do OFWs save at all?

Many ideas had been floated on how to turn OFWs into savers and investors.

Yet, year after year, evidence shows that personal remittances from Filipino expat workers are almost entirely spent on household expenses.

Little, if any, is left for savings or retirement. There are exceptions. And there are many stories of those who have "reintegrated" successfully.

But, in far too many instances, an ILO study states that a returning OFW's savings are spent on one-time acquisition of personal assets (e.g. car, house, lot, etc.) back home.

Therefore, in a short period, savings earned from overseas work are tied up in these liabilities.

Data culled by the International Labour Organisation (ILO) show that the lion's share of OFW earnings go to household expenses, debt payments, appliances and education. Personal cash savings account for a measly 1 per cent.  ILO

2. When an OFW falls ill or dies, who comes to his help?

The first point of contact is the Philippine embassy or consulate. They usually refer cases to other attached agencies, like the Assistance to Nationals desk or the Overseas Workers Welfare Administration (OWWA), or both.

When an OFW falls ill, PhilHealth kicks in.

These services, however, only work if an OFW falls ill or dies too soon. Most are fine and live too long.  

3. What do OFWs get from OWWA and PhilHealth?

If an OFW loses his job, he gets job-loss cover of P5,000 from OWWA, and another P20,000 as "seed fund" to start a business. Token amounts but, at least, there's something.

Filipinos apply through various private recruitment agencies for overeas work.  About 10 per cent of the Philippines' 103.3-million inhabitants work abroad and plough back $32 billion home annually.  File / Gulf News

And while he is healthy and of working age, there's no problem. Trouble comes when OFWs live too long. Most OFWs belong to this category.

Currently, membership of OFWs in the state-backed Social Security System (SSS) is voluntary (it only is mandatory for private sector workers within the Philippines).

The result: Many OFWs end up falling through the cracks, even if SSS has marketing officers stationed in most Philippine embassies and consulates. 

4. Why is the OFW pension a 'ticking timebomb'?

No state-mandated pension scheme exists specifically meant for OFWs, that's why. SSS' mandate is limited to Filipinos working in the private sector back home, and is only optional for OFWs.

A PRN form. OFWs are now allowed to pay their contributions in one go. For the months of January to December of a given year, they can pay within the same year; Contributions for the months of October to December of a given year may also be paid on or before the 31st of January of the succeeding year. A Payment Reference Number (PRN) like the one above must be generated (at the SSS branch or partner remittance centre) for each payment, which improves traceability.  Gulf News

Those who migrate to North America (i.e. who have 401K in the US) or the few who become permanent residents of Singapore (through Central Provident Fund) do not face such dilemma.

Read more: How to get your SSS payment reference number

But many Filipino expats do eventually go home — infirm after many years of toil away from their loved ones and driven out of the labour market by old age — without a social cover. 

Read more #Pinoy stories in UAE

"It's a growing social time bomb," said Rex Varona, of Asian Migrant Forum, an advocacy group based in Hong Kong and Manila. "We've done thousands of finlit (financial literacy) trainings for OFWs. Unfortunately, since they are not mandated to save for themselves, they end up in a much worse condition than before they left the country." 

Varona said since most of OFWs' earning go to consumption, Social Security payments become last priority.

And since it's not mandatory, most OFWs leave SSS completely.

5. What are the ways of making savings or retirement mandatory for OFWs?

There are a number of solutions proposed. 

First is to make SSS membership mandatory for all OFWs — paying the maximum contribution (Php1,760 per month). This automatically qualifies them to the SSS Flexi Fund savings scheme. But this needs legislation.

Second, through the creation of a National Provident Savings Programme (NPSP) for OFWs, patterned after Singapore's Central Provident Fund (CPF).


Issuance of SSS Payment Reference Number: From January 16, 2018, SSS requires a PRN to be generated for every payment contribution from individual members, including OFWs. To get a PRN, e-mail o with your details and SSS number; or phone SSS call centres (+632 920 6446 / +632-917 7777). Gulf News

Both solutions take either an act of Congress — a generally slow process — or the issuance of an Executive Order (EO) by President Rodrigo Duterte, which may be quicker and is the route preferred by migrant advocates.

Moreover, there are various retirement options for Filipinos, including ones offered by private firms. 

But nothing beats the reach and record of the Government Service Insurance System (GSIS, for state workers) and the Social Security System (SSS, for private sector workers).

Both are mandatory schemes, but only for Filipinos within the Philippines.

No such scheme exists for OFWs.

6. Why not mandate SSS membership for OFWs?

As cited above, this can only be made possible through an act of Congress or a presidential EO (Executive Order).

The SSS law is already 64 years old (1954). The migration of Filipinos for overseas work is a relatively new phenomenon.

Currently OFWs can secure their retirement by continuing their (voluntary) contributions to SSS. 

The headquarters of Social Security System on East Avenue, in Quezon City, Manila, Philippines. SSS has an investible fund of about Php500 billion, built over the years from members' contribution.  File / Gulf News

However, a Gulf News survey shows only 30 per cent of OFWs actually pay their SSS contributions regularly.

SSS cannot oblige foreign employers of OFWs to give their counterpart fund (3.63%) and (7.37%) for employees, as is the rule in the Philippines.

The survey, though it was culled from 130 respondents, confirms what most OFWs arealdy know: when saving is not mandatory, nobody saves or signs up.  

7. Why is a law on mandatory provident fund system hard to craft?

No sitting Philippine president or administration would want to be seen forcing a mandatory OFW pension scheme similar to SSS.

Some sectors may brand it as an "unlawful exaction".

But times have changed. And those same people who accuse the government of making "exactions" realise the long-term benefits.

Besides, the government is already mandating OFWs to contribute — though only to a limited extent — to the Overseas Workers Welfare Administration (Owwa).

With Owwa, every OFW must pay $25 every contract (maximum of two-year coverage) to get death/burial insurance of up to Php200,000 and repatriation cover.

But nothing for retirement.

8. What happens if the status quo, i.e. no mandatory pension scheme, stays?

Even the International Labour Organisation (ILO) warns that more of the same could eventually result in a bigger disaster, as most OFWs don't die overseas.

They will eventually go home, upon retirement, mostly empty-handed and live a life of virtual paupery.

9. What are Philippine lawmakers doing about it?

Philippine legislators had done much to institutionalise protection of OFWs.

One is the "Flor Contemplacion Law", or Migrant Workers Act. These laws significants improved the standards of protection.

Currently, the Philippine House of Representatives (Lower House of Congress) are considering bills creating a provident or pension fund system for OFWs.

Three such proposals, all filed recently, are now facing an acid test in the 292-member House.

10. Why is 'mandatory' the key word?

It means obligatory.

It would mean flouters would face penalties, financial or otherwise. When it becomes law, state has the power to oblige its citizens to do certains things.

11. What would it mean in reality?

It may mean OFWs must regularly pay their monthly contributions for their own future pension.

It may also mean the government may not allow an OFW to leave for overseas work again, say after spending their holiday, without ensuring that they regularise their status in the provident fund created for them.

It may be akin to making the SSS Flexi Fund mandatory.

Currently it is not.

A scene at the Ninoy Aquino International Airport Terminal 3. Remittances from Filipino expatriate workers have grown over the years, to a record $28.06 billion in 2017, according to data from the Bangko Sentral ng Pilipinas, the country's central monetary authority.  Gulf News File

12. What is the proposed national provident savings program for OFWs?

The clamour for its creation now comes from migrant workers advocates themselves. The ILO is also helping push the idea of creating of a National Provident Saving Program (NPSP) for OFWs.

It solves two-fold issues: diffuse the OFW retirement timebomb, and potentially create a massive provident fund that will create a virtuous financial cycle.

In effect, that would create a mini-SSS or a sort of sovereign wealth fund (SWF). Instead of being built from proceeds of mineral resources (as in the case of Norway and other oil-rich countries), the fund would be built on savings of Filipino expat workers.

13. Would OFWs agree to the creation of a fund like NPSP?

There's a real need and a strong clamour from OFWs for social protection. A provident savings program for them has to be done in one form or another.

14. A provident savings program for OFW...would it work?

Mandatory savings plan through SSS works for private sector workers in the Philippines and even some OFWs themselves.

Any savings scheme for OFWs into any state-protected fund is a step in the right direction.

To make such a mandatory savings plan less disruptive, it could be based on SSS' grid system, or a slight variation of it.

The question of who will run and regulate the fund, what control mechanisms are needed to prevent it from running aground must be addressed, too.

15. Is 10% of OFW's declared income a good starting point?

If there's a salary or contract verification process attested by the Philippine embassy or consulate overases, this may actually work.

The proposed maximum of 10 per cent is actually modest ­— compared to 35 per cent  compulsory contribution to the Central Provident Fund, CPF, in Singapore, (created in 1955) and 12.5 per cent for the Philippines’ Social Security System (SSS).

Gulf News survey shows two out of three Overseas Filipino workers have neglected or not regularly paying their monthly contributions to the Social Security System, a state retirement fund. File photo

Still, even if only 5% of $32 billion ($1.6 billion) Filipino expats remit each year end up in their state-supervised provident fund, that would build a money warchest equivalent to one Burj Khalifa annually. 

16. What if no mandatory NPSP — or something like it — is created? 

Without such a system, OFWs would be exposed to more of the same, a ticking pension timebomb.

17. What happened in the past with this provident fund idea for OFWs? 

As early as 2009, under the 16th Congress, Senator Richard Gordon proposed the creation of a provident fund for OFWs.

Nothing came out of it.

Gordon’s bill was put in the back-burner indefinitely. The initial enthusiasm about the legislation started gathering dust.

In 2001, then President Gloria Macapagal-Arroyo promised to spearhead the creation of the OFW Provident Fund.

Again, nothing came out of it.

Currently, both the House of Representatives and the Senate, are dominated by the "super-majority" of the allies of Duterte, who earned a massive support from overseas voters. They are doing something, but not as expeditiously as expected.

18. How many OFW provident fund legislations are now being considered?

There are three bills filed in the Philippine House of Representatives — House Bills (HB) 3746, 4570 and 7228 — in the last two years.

Though they differ in certain details, the bills have the same substance: create a  retirement or provident fund for OFWs.

HB 3746 (authored by Rodante Marcoleta of Sagip Partylist) proposes an OFW retirement fund system that mandates all OFWs to park 5 per cent of their gross monthly income for at least 10 years to the fund after completing a registration process via the Philippine Overseas Employment Administration (POEA).

Upon retirement, member-OFWs will be able to receive pension that will enable them to start a business or to cover their old-age needs.

HB 4570 (authored by Gary Alejano of Magdalo Party-list) pushes for the creation of an OFW Pension Fund. Members must sign up through the POEA and the Commission on Filipinos Overseas (CFO), and remit 5 per cent of their gross monthly income — but only for five years.

HB 7228 (authoried by Winston Castelo of the 2nd District of Quezon City) seeks to create a Special Pension Fund for OFWs which the members or their beneficiaries will be able to use upon retirement, in the event of involuntary loss of employment or disability, or upon death.

19. What's the current status of those bills?

A consolidated version out of these three proposed legislations is seen by many as an urgent legislative agenda.

But going by the past record of the Philippine legislative mill, this may take between five to six years before the consolidated version becomes a law.

20. What should I do now?

Set a savings target, learn more about investing, and adhere to your savings target.

Even if nothing comes out of the proposed mandatory NPSP or a similar scheme, you'll be ahead of the curve. Enjoy your earnings upon retirement. 

Timeline: OFW Provident Savings Fund 

December 2001
Philippines President Gloria Macapagal-Arroyo pledged the creation an OFW Provident Fund during her first state-of-the-nation address but left the job of making the rules to the Overseas Workers Welfare Administration (OWWA), the agency tasked with overseeing the welfare of Filipinos overseas. Nothing came out of it. 

July 31, 2001
SSS launches provident fund for OFWs. The “SSS Flexi-Fund” for overseas Filipino workers (OFWs), however, is a voluntary savings product as part of government’s attempt to increase savings rate of the economy as well as the abused Filipino worker. Most Filipino workers do not even pay their Social Security System membership, which is also voluntary for OFWs.

October 6, 2009
Senator Richard J. Gordon proposes creation of mandatory “provident fund” for OFWs, that uses the Central Provident Fund (CPF) of Singapore as a model. It aims to help OFWs save and invest their money for their social security. The proposed program would presumably help OFWs working abroad make good use of their money — using the “work-save-invest-to-prosper” model.

2017 to 2018
Three legislations — House Bill (HB) 3746, 4570 and 7228 — were filed by three congressmen creating a provident fund system for OFWs. Bills are being consolidated by technical working group in the Lower House.

Fast Facts:

Remittances amounting to $32 billion in 2017 from OFWs (double the $16 billion in 2007) greatly improve the country's cash position and balance of payments.

Even if 1 per cent of OFW remittances be mandated to be funnelled into a retirement fund, that's equivalent to $320 million (or Php16.64 billion).

OFWs enjoy insurance coverage provided by OWWA and PhilHealth, but only to a limited extent — Php200,000 death and Php20,000 burial benefits and repatriation insurance covered by OWWA.

PhilHealth also covers part of medical treatment both overseas and back home in the Philippines, through a reimbursement scheme. A real-life scenario: Php70,000 (about Dh5,000) PhilHealth coverage for a cancer treatment at a private hospital amounting to about Php1,000,000 (Php70,175).