INSURANCE AND PENSION PLANS (source: Insurance Commission)

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1 INSURANCE AND PENSION PLANS (source: Commission) and pension plans offer alternative source of finances for overseas Filipinos particularly upon reaching retirement age. Investment in insurance and pension plans assure them and their families of readily available finances in cases of death, health problems and emergency. Companies offering insurance and pension plans offer a variety of benefits accompanying the plan, such as transferability of benefits to heirs, minimum amount for premiums, and assured continuity of benefits and guaranteed full payment even in cases of untimely death or disability during the paying period. The following companies used as an example here belong to the top ten insurance companies in the country based on certain indicators such assets and net income, as certified by the Commission. You may also visit the Philippine Commission s website at to see the complete list of licensed and best performing insurance companies. Top Ten (Life) Companies Per Category As of 31 December 2008, based on the Commission Assets 1. Philam Life & 2. Sun Life Of 3. Insular Life 4. Phil. AXA Life 5.Manufacturers Life Co., The (Phils.) 6. Pru Life Ins. Of U.K. 7. Ayala Life Investment at Cost 1. Philam Life & 2. Sun Life of 3. Insular Life Ltd., The 4.Manufacturer s Life Co., The (Phils.) 5. PNB Life, 6. Ayala Life 7. Phil. AXA Life Net worth (tentative as of 20 July 2009) 1.Philippine American Life & 2. Insular Life Ltd., The 3. Sun Life of 4. United Coconut Planters Life 5.Manufacturer s Life Co., The (Branch.) 6. Great Pacific Life 7. Ayala Life, Paid-up capital 1.Philippine American Life & 2. Sony Life (Phils.) 3. Ayala Life, 4. United Coconut Planters Life 5. Sun Life of 6. Great Life Financial 7. Great Pacific Life Premiums Earned 1.Philippine American Life & 2. Sun Life of 3. Insular Life Ltd., The 4. Phil. AXA Life 5. Pru Life Ins. Of U.K.. 6. Manufacturers Life Co., The (Branch.)Assur ance 7. Ayala Life Generali

2 8. United Coconut Planters Life 9. Great Pacific Life 10. Generali Pilipinas Life 8. Generali Pilipinas Life 9. Pru Life of UK 10. Great Pacific Life 8. Manufacturers Life Co., The (Phils.) 9. Phil. AXA Life 10. Beneficial PNB Life Co., 8. Manufacturers Life Co., The (Branch) 9. Pru Life of UK 10. CARITAS Life 8. Great Pacific Life 9. United Coconut Planters Life 10. Philam Equitable Life Top Ten (Non-Life) Companies Per Category As of 31 December 2008, based on the Commission Premiums Earned 1. Malayan Company, 2. Prudential Gtee. & Assce., 3. BPI/MS (FEB Mitsui Marine) 4. Mapfre Asian 5. Standard Company, 6. Pioneer & Surety 7. Philippine Charter 8. UCPB General Company, Gross Premiums 1. Malayan Company, 2. Prudential Gtee. & Assce., 3. BPI/MS (FEB Mitsui Marine) 4. Standard Company, 5. Pioneer & Surety 6. Philam Company, 7. UCPB General Company, 8. Federal Phoenix Net worth 1. Pioneer & Surety 2. Malayan Company, 3. BPI/MS (FEB Mitsui Marine) 4. Mapfre Asian 5. Tokio Marine Malayan Co., 6. Philippine's First Co., 7. Petrogen 8. Cibeles Investments 1. Malayan Company, 2. BPI/MS (FEB Mitsui Marine) 3. Philam Company, 4. Pioneer & Surety 5. Mapfre Asian 6. PNB General Insurers Company 7. Cibeles 8. Philippine Charter

3 9. Federal Phoenix 10. Philam Company, 9. Philippine Charter 10. Mapfre Asian 9. Philam Company, 10. Alliedbankers 9. Federal Phoenix 10. Petrogen For more information you may contact the Commission at: Commission 1071 United Nations Avenue Ermita, Manila Tel. Nos. (632) to 70 locals Direct line: (632) Website: B. Pension Plans Pension funds provide retirement income through annuities to employees covered by a pension plan. Funds are obtained through contributions from employees or employers. Pension funds differ in method of payment although the purpose remains the same. The first method of payment known as defined benefit plan guarantees payments of benefits that are not tied to contributions but based on a prescribed formula. Under this type of plan, the sponsor shoulders risk of shortfall in investment returns. The other type of plan defined contribution plan both the employee and the employer contribute specific amounts to the plan periodically. Under the defined contribution plan, the employee bears the risk of accumulated funds not meeting replacement income goal. The Government Service System (GSIS) and the Social Security System serve as the largest pension funds in the Philippines. These two government administered funds invest in government securities, the stock market, commercial paper, and property development. Their income usually comes from salary and housing loans, interest income in investments, dividends, and foreign exchange gains. Apart from GSIS and SSS, there is another smaller government administered fund: the Armed Forces of the Philippines Retirement Separation and Benefits System (AFP-RSBS). These three public pension funds all fall under, mandatory defined benefit plan. At present, GSIS and SSS experience difficulty in meeting their redistribution goal. Specifically, benefits paid to member have outpaced the amount of contributions of members. Meager returns on investments, poor compliance and enforcement in payment of premiums, low collection rate on loans, huge losses from housing programs, and the lack of regulatory institution threaten the viability of the two government administered pension funds. Nonetheless, there have been initiatives to reform the country s pension system and enhance its role in capital market development. All in all, insurance and pension plans offer alternative source of finances for overseas Filipinos particularly upon reaching retirement age. Investment in insurance and pension plans assure them and their families of readily available finances in cases of death, health problems and emergency. Companies offering insurance and pension plans offer a

4 variety of benefits accompanying the plan, such as transferability of benefits to heirs, minimum amount for premiums, and assured continuity of benefits and guaranteed full payment even in cases of untimely death or disability during the paying period. The Social Security System Flexi-Fund The SSS Flexi-fund is a voluntary, provident fund for overseas Filipino workers (OFWs). It is an additional service provided by the SSS on top of the regular OFW membership. The SSS, through the Flexi-fund Program, provides OFWs the opportunity to set aside a part of their earnings abroad and maximize the returns on their Flexi-fund contributions. The accumulated funds are investments for the future. It is offered as a supplement to SSS benefits, which one is entitled to as a regular OFW member, by promoting savings generation, thus serving as an additional layer of social security protection. The Flexi-fund is open to all OFWs who are: recruited in the Philippines by foreign-based employers for work abroad; having a source of income in a foreign country; or residing permanently in a foreign country. Benefits As a Flexi-fund member, one will receive additional income from savings in the Flexifund account, on top of the benefits under the regular SSS coverage. Members who reach the retirement age of 60, or become disabled or get injured at work, are entitled to Flexi-fund benefits, either in the form of a monthly pension, lump-sum payment, or combination of both. Beneficiaries of a pensioner who has passed away shall be given a lump sum amount equivalent to the cash value of the remaining pension. A good investment The contributions that are remitted to the SSS Flexi-fund are invested in government securities. The interest earned by the Flexi-fund deposits is based on the average 91-day Treasury bill rate, thus ensuring a transparent, high-yielding and risk-free investment of one s hard-earned income abroad. The SSS Flexi-fund provides good security for one s future and one s family. Primarily, the program aims to supplement one s pension benefits. Aside from this, one may apply for early withdrawal of Flexi-fund savings to support urgent financial needs when one s overseas employment contract ends. It can also be used to finance schooling, construction of a house or a small business. Withdrawal An OFW member may withdraw his Flexi-fund contributions with interest, either in full or partial lump sum, anytime, especially in times of need. Pre-termination fees shall be imposed, however, on withdrawal of accumulated contributions that have stayed in the Fund for less than a year. Computation of pre-

5 termination fees shall be based on net earnings (interest earnings less operating expenses) at the time of filing of claim. Charges shall be in accordance with the following schedule: Retention/Holding period At time of early withdrawal Pre-termination fees 6 months and below 20% of net earnings Within 6-12 months 10% of net earnings 12 months and above None For all Flexi-fund benefit claims, including early withdrawals, use SS Form DDR-2, which is available from the SSS website. One may submit the duly accomplished form at any local SSS branch for claim settlement. Difference between the SSS Flexi-fund and regular OFW membership The Flexi-fund is a voluntary provident fund scheme, designed exclusively for OFW members of the SSS. It is a pension plan and savings account rolled into one that enables your money to earn interest. The program provides flexible modes of paying one s contributions, and allows one to easily vary the amount that need to be paid. One s contributions and earnings are posted to individual Flexi-fund account. Enrollment To enroll in the Flexi-fund, one can register at any SSS foreign representative office located in various countries. One may also download SS Form OW-1 from this web site. After filling out the form, send it by mail or fax to the following address: International Affairs and Branch Expansion Office Social Security System 3/F SSS Bldg., East Avenue Quezon City, 1100 Philippines Telefax: (632) member_relations@sss.gov.ph Website: In case of local enrollment, submit the duly accomplished SS Form OW-1 at any local SSS branch prior to one s deployment. Present a valid overseas employment certificate (OEC) or E-receipt issued by the Philippine Overseas Employment Administration (POEA) as proof of pending deployment. If an OFW member, who already filed for a full early withdrawal claim, decides to resume his Flexi-fund membership, he is required to register in the program again using SS Form OW-1. Qualification for the SSS Flexi-fund Program One must first be an SSS member before joining the Flexi-fund Program. First-time members should first make sure that their contribution to the regular SSS program is based on the prevailing maximum monthly salary credit. For existing OFW members, present the latest SS Form RS-5 receipt as proof of payment of the maximum contribution amount.

6 Duration of SSS Flexi-fund contributions One can make deposits to the Flexi-fund account anytime, provided that one continues paying the maximum monthly contribution for the regular SSS membership. Any amount, not lower than P200, paid in excess of the required contribution shall be credited to Flexi-fund and applied with interest. Even when the employment abroad is over, one may still continue the Flexi-fund payments. The opportunity to contribute to Flexi-fund shall cease upon filing of a final claim (retirement, death or total disability benefit) under the regular SSS program. Where to remit Flexi-fund payments Simply fill up SS Form RS-5, which is available at any SSS office abroad, and remit the payment at any of the following accredited collecting banks or companies: 1. Allied Bank 2. Asiatrust Bank 3. Bank of the Philippine Islands (BPI) 4. Equitable PCI Bank 5. International Exchange Bank 6. Land Bank of the Philippines 7. Metrobank 8. Philippine National Bank (PNB) 9. Rizal Commercial Banking (RCBC) 10. Security Bank 11. Luzon Brokerage (LBC) SAMPLE ILLUSTRATION OF LUMP SUM BENEFITS UNDER THE SSS FLEXI-FUND PROGRAM FOR OFWS Interest under the SSS Flexi-fund is Tax-free prevailing 91-day Treasury bill rates, quoted on a per annum basis Subject to quarterly re-pricing, to make it more reflective of current market conditions Computed at actual date of payment of Flexi-fund contributions, and posted to individual accounts at the end of the month Compounded monthly, such that earnings at the end of each month are taken into account in the computation and application of earnings in the succeeding months CASE 1: MONTHLY CONTRIBUTION PAYMENT OF P2,000 Contribution Period (in years) Total Contributions Paid Lump-sum Benefit Amount* 3 72,000 78, , , , , , ,665

7 20 480, , ,000 1,361, ,000 1,962,714 CASE 2: ONE-TIME CONTRIBUTION PAYMENT OF P100,000 Contribution Period (in years) Total Contributions Paid Lump-sum Benefit Amount* 3 100, , , , , , , , , , , , , ,880 * Actual amount of lump-sum benefits depends on actual interest rate re-pricing C. Pre-need plans Pre-need companies offer education, pension, and memorial plans. the Rules on Pre-Need of the Securities and Exchange Commission (SEC), pre-need plans are contracts that provide for the performance of the future service(s) or payment of future monetary consideration at the time of actual need, payable either in cash or installment by the plan holders at prices stated in the contract with or without interest or insurance coverage and includes life, pension, education, internment and other plans which the commission from time to time approve. Pre-need plans come in two forms: open-ended and fixed value plans. Open-ended, actual cost or traditional plans are acquired through fixed costs and delivered to the beneficiary based on actual costs upon the period of availment. They, however, expose preneed firms to risks of not being able to service maturing obligations. Fixed-value plans are plans in which the amount of the benefit fixed at the time of purchase. These plans may yield returns below inflation rates but have features to compensate for it. In the Philippines, pre-need pension plans usually have the following features: a.) Payment of contract price averages five years, which can be made in monthly, quarterly or yearly installments.

8 b.) Maturities of pre-need pension plans are either upon reaching a certain age of the plan holder or over a period of years after full payment. c.) Pension benefits may be paid out in lump sum or installments or both at the option of the plan holder. d.) In case of death of the plan-holder before the maturity date, pay-out will still be at maturity date. e.) To ensure payment of benefits, pre-need companies are required to contribute to a Trust Fund which are funded from their collection A number of pre-need companies are subsidiaries of banks or insurance companies. Pre-need firms are regulated by the SEC and not subject to liquidity requirements imposed by the central bank. Recently, however, a few of the big pre-need companies have experienced financial difficulties and failed in fulfilling their contractual obligations to their clients. The following companies have been given licenses to sell plans for 2009 by the Securities and Exchange Commission upon satisfactorily passing the SEC requirements Pre-need plans licensed by the SEC 1. AMA Plans, 2. Ayala Plans, 3. Caritas Financial Plans, 4. Cityplans, 5. Cocoplans 6. Danvil Plans, 7. Destiny Financial Plans, 8. Eternal Plans, 9. First Country Plans, 10. First Union Plans, 11. Grayline Plans, 12. Himlayang Pilipino Plans, 13. Loyola Plans Consolidated, 14. Manulife Financial Plans, 15. Mercantile Careplans, 16. Paz Memorial Services, 17. Permanent Plans, 18. Philam Plans, 19. Provident International Plans, 20. Prudentialife Plans 21. St. Peter Life Plan, 22. Sun Life Financial Plans, 23. Transnational Plans, 24. Trusteeship Plans, (from )

9 The following list, on the other hand, is composed of companies willing to shell out more money to beef up their capital this year, in anticipation of difficulties in growing their trust funds due to the current rate of return of financial instruments in the market: 1. Ayala Plans, 2. Cocoplans 3. Danvil Plans, 4. Eternal Plans, 5. First Union Plans, 6. Himlayang Pilipino Plans, 7. Ideal Pension Plans 8. Loyola Plans Consolidated, 9. Manulife Financial Plans, 10. Mercantile Careplans, 11. Pacific Plans 12. Paz Memorial Services, 13. Permanent Plans, 14. Philam Plans, *did not sign agreement because it says its trust fund is more than sufficient. 15. Provident International Plans, 16. Prudentialife Plans 17. St. Peter Life Plan, 18. Sun Life Financial Plans, 19. Transnational Plans, 20. Trusteeship Plans,