State pension fund Government Service Insurance System (GSIS) is not affected by its recent shift to Philippine Financial Reporting Standard (PFRS) 4 and is capable of paying its financial obligations to members and pensioners.
PFRS 4 requires the reporting of future social benefit liabilities in its financial statement.
GSIS president and general manager Rolando Macasaet said in a statement on Friday that there will be no disruption in the payment of benefits to its members and pensioners as “the new accounting standards “will not adversely affect our capability to provide their benefits, as and when they fall due.”
In its audited 2020 financial statements, GSIS posted a strong cash position in 2020 at PHP26 billion.
“Our cash flow projection for the next five years shows that we can cover all our obligations,” Macasaet said.
“PFRS 4 offers an understanding of the longer-term financial sustainability of GSIS that involves projections and economics, which is beyond the scope of financial statements. Ultimately, members and pensioners should be more interested in the pension fund’s existing obligations, projected income, projected cash outflow, funding gap, and what the current administration plans to do to address such issues,” he added.
The stable cash flow position at end-2020 stems from practices that GSIS has been implementing, allowing it to manage the level of social benefit liabilities and maintain a healthy actuarial life for its funds.
Based on a 2020 study, GSIS has a fund life of 32 years or until 2053.
The state pension fund’s investment performance in 2020 was even recognized by the Commission on Audit, which cited in the observation memo that GSIS’s performance on the sale of traded stocks is “commendable”.
“GSIS has adopted and applied sound investment strategies in the trading and disposal of its investments in publicly-listed Philippine corporations and exchange-traded funds pursuant to GSIS Investment Policy Guidelines,” the state external auditor said.
Consequently, GSIS generated a “remarkable income” from the sale in the amount of PHP2 billion, a 65-percent increase over the previous year’s PHP1.22 billion.
At the same time, GSIS reported that it released PHP145 billion in loans to members and pensioners this year.
“While private banks and other financial institutions have tightened lending standards during the pandemic, GSIS seized the opportunity to aggressively respond to the pressing financial needs of our members and pensioners through various loan programs, especially amid the Covid-19 health crisis,” Macasaet said.
The state pension fund offers several loan facilities such as the GSIS Financial Assistance Loan (GFAL) and other loans like emergency, multipurpose, computer, pension, and GFAL-education.
Macasaet said GSIS’s collection efficiency on loans and premiums is nearly 100 percent while administrative and operating expenses were consistently kept below the 12 percent threshold prescribed by law. In 2020, this was recorded at only 3.72 percent and 2.9 percent in 2019. (PR)