Voluntary pension-fund scheme (for OFWs)

With the huge drop in the stock market Wednesday, with the index, at one point, going below the 3,000-point psychological resistance, the plan of the government and the private sector to come up with a fully developed capital market bears watching. Dubbed the “Blueprint,” the plan is now undergoing finishing touches with a suite of changes and objectives lined up until 2010 to ensure that the country’s capital market development will be on a par with that of the developed countries. What is laudable about the “Blueprint” is that it seeks to mobilize savings, especially from among the OFWs through the design of a voluntary pension-fund scheme that would complement with that of the Social Security System and the Government Service Insurance System. With more than $1 billion a month in remittances, the government-private sector plan aims to tap a portion of the OFW funds for a pension scheme that would be privately funded. This scheme could give a longer-term perspective in stock market investing in the country. The reason there was panic selling last Wednesday is due in part to the lack of a long-term focus on stock market investments. With the voluntary pension fund, the local market will not be as vulnerable to outside factors, such as the 3-percent drop in the Wall Street the night before that served as fulcrum for the more than 7-percent market decline on the Philippine Stock Exchange. The market rout could not have happened in a big way with the pension-fund scheme in existence. As spelled out in the “Blueprint” which is being discussed at the Securities and Exchange Commission, the government is set to “promote the development of personal-pension accounts to deepen the long-term investment capital.” As it is now, the provider of long-term capital to the stock market are insurance companies, pension funds and trust accounts in the banking system. Under the plan, the mobilization of the OFW remittances would be made as part of increasing the savings ratio so that capital market development ensues. Already, the Bangko Sentral ng Pilipinas has come up with a plan to ensure the financial literacy of the OFWs whose remittances are mostly channeled to consumer products. What the BSP wanted to do is to rechannel the remittances that they may be used for the development of small and medium enterprises. This can only be done by empowering the OFWs on the available investment vehicles they could tap to make them investment-savvy. On this aspect, the SEC is doing its utmost to fulfill its mandate spelled out in the Securities Regulation Code (SRC). Under the SRC, the SEC is deemed the “regulator and promoter of the nation’s capital market institutions and their participants achieve certain economic and social objectives.” SEC wanted to make the capital market not only a change agent in developing a more balanced, stable and competitive financial system but also to make it a complement to the banking sector in delivering financial services and products to a wide range of local savers and investors. Besides this, the SEC is also pushing for the evolvement of the capital market into an “intermediary in mobilizing and allocating savings to private sector enterprises that drive economic growth and job creation. “ This is where the voluntary pension fund scheme comes in. With the remittances of the OFWs tapped for funding private enterprises, the OFWs assume added significance in the development of the capital market. By letting them know the benefits of having investments, in say, the pension fund scheme, they would further contribute to the economic development of the country. Even other savers could be persuaded to contribute their part in the growth of enterprises by chipping in to the voluntary pension fund. There is now a move in Congress to come up with the legislative machinery to make the voluntary pension-fund scheme a reality. This is part of the “Blueprint” for the capital market development. It is high time the scheme is implemented because of its manifold benefits, not to mention the fact that it would bring in a longer-term perspective in stock market investing. With that in place, the local bourse need not worry about the performance of the Wall Street; it will have its own momentum.  E-mail: hugagni@yahoo.com.

 

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