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SEC mulls increase of pre-need’s trust fund deposit

GMANews.TV

Feb. 25, 2009

MANILA, Philippines – The Securities and Exchange Commission (SEC) is eyeing to increase pre-need companies’ trust fund deposit contributions, a move seen to protect planholders’ rights and prevent the industry’s collapse. 

The proposal is partly in response to calls made by Senator Mar Roxas who earlier suggested that the agency should drastically increase trust fund deposit contributions from the current five percent scheme to 70 percent. Contributions are used to pay customers’ plans once these fall due. 

The local pre-need industry has a P46.83-billion trust fund deficiency as of end-June as investment earnings shrink due to the global crisis. Moreover, the December figure is expected to incur a much bigger deficit since the impact of the global crisis was stronger in last year’s second half. 

As a result of the trust fund deficit, many companies are thinking of various options to settle their obligations, most of which involve unwinding plans and paying all plan holders.

As of December 31, 2007, the industry had a surplus of P6.8 billion based on an assumed yield of 12 percent on their trust funds.

However, in the second quarter of 2008, when the financial meltdown grew worse with each passing month, the 12 percent assumption was no longer achievable. In fact, six percent was even a tough goal for some of the companies.

SEC chairperson Fe Barin said “the commission will study the feasibility and sustainability of increasing the contribution to the trust fund from the first installment of premium paid on a plan.”

Preneed companies willingly set higher trust fund contributions

Barin noted though that most pre-need companies have willingly set their trust fund contribution rates higher than the required 5 percent minimum for the first year.

Moreover, Barin said the five-year average trust fund contributions of pre-need firms even exceeded the 45 percent for life plans or 51 percent for other type of plans’ required minimum.

SEC documents show that eight pre-need firms offering education plans have an average 25.17 percent contribution to trust funds in the first year and an average of 58.87 percent in the first five years.

These firms include Cocoplans, Danvil Plans, Eternal Plans, Grayline Plans, Loyola Plans Consolidated, Philam Plans, Sun Life Financial Plans, and Trusteeship Plans.

For pension plans, the average trust fund contributions of 16 firms amount to 21.77 percent for the first year and 59.18 percent for the first five years.

Firms with contributions higher than the minimum amount required are Ayala Plans, Caritas Financial Plans, CityPlans, Cocoplans, Danvil Plans, First Country Plan, First Union Plans, Grayline Plans, Loyola Plans, Mercantile Careplans, Permanent Plans, Philam Plans, Provident Plans, Sun Life, Transnational Plans and Trusteeship Plans.

Only six firms offering life plans have contributions above the minimum required, averaging 14.9 percent in the first year and 51.8 percent in the first five years.

These firms are Cocoplans, Eternal Plans, Loyola Plans, Paz Memorial Services, St. Peter Life Plan, and Trusteeship Plans.

The SEC did not provide a list of the firms that complied only with the minimum requirement nor did it indicate if any firms have failed to make the minimum required contribution to the trust fund from the premium paid for plans. – GMANews.TV

February 25, 2009 - Posted by | Philippine Newspapers/Web News | , ,

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