GLOBAL credit watchdog Moody’s Investors Service on Friday highlighted the importance of reforming the pension system for military and uniformed personnel (MUP), saying this would be a vital part of the country’s fiscal repair in the long run.
In an interview over ANC, Moody’s Investors Service Sovereign Risk Group Senior Vice President Christian de Guzman said military pension reform could be one of those things that would put the country’s fiscal path “on a more sustainable trajectory.”
“This does not cause immediate risk in 2023 or 2024, but as you go out, as these pensions start to escalate over time, that is going to weigh on the government’s ability to get that debt back down,” De Guzman said.
“So I’m not sure if we’re talking about a crisis in 2023 or 2024… but clearly, it’s an important part of the fiscal repair,” he said.
In a recent hearing at the House of Representatives, Finance Secretary Benjamin Diokno said a pension reform bill was urgently needed to establish an adequate, fair, dignified, and financially sound pension system for soldiers, policemen, and other uniformed personnel.
He said the core objective of the government’s efforts to reform the pension system for military and uniformed personnel was to address the unsustainability and uncertainty of the current pension system.
He said the current MUP pension system’s dependence on full government funding exposed it to economic and fiscal downturns and compromises its stability and reliability.
Pension arrears in the past few years alone amounted to P3.7 billion in 2021, P32.6 billion in 2022, and P5.2 billion in 2023, and are projected to reach P4.8 billion in 2024.
“At the core of our reform package is the creation of separate pension funds that recognize the unique nature of military service, and provide retirement benefits that reflect the sacrifices by the military and uniformed personnel,” Diokno said.
He also assured soldiers, policemen, and other uniformed personnel that while the reform bill would require them to give a contribution, this is beneficial to them because it gives them full ownership and vested rights over the pension fund.
The proposal also includes a uniform retirement age of 57 or upon accumulation of 30 years of satisfactory service for the MUP to encourage those in active service to stay longer and ensure more experienced personnel are retained.
Initial resistance to the proposed reforms led a House committee to draft and approve a substitute bill that addressed some of the concerns raised by members of the uniformed services.
But Defense Secretary Gilberto Teodoro Jr. on Thursday expressed his concerns over the substitute bill approved by the House of Representatives ad hoc committee regarding reforms on the pension system for MUP.
In a statement, Teodoro particularly expressed his worries over the proposed mandatory contributions for military personnel, which includes those who have already completed at least 20 years of active service.
“First, I do not subscribe to the proposed blanket mandatory contributions for military personnel, especially for those who have already completed at least 20 years of active service,” Teodoro said.
“The President envisions a carefully transitioned introduction of any pension reform plan so that those in active service will be impacted in the least possible way. The imposition of mandatory monthly contributions without a transition phase will definitely have an impact on our soldiers,” he added.
Teodoro also said that looking after the welfare of military pensioners was also a part of his duties as Defense chief.
“As the secretary of National Defense, it is also incumbent upon me to look after the welfare of our military pensioners. It has been my position that their pensions and entitlements, including 100 percent automatic indexation, shall remain unchanged. Ensuring the non-diminution of their retirement benefits is the least we can do in recognition of their sacrifices to the country,” he said.
Teodoro noted that the Armed Forces of the Philippines (AFP) has a very “substantial distinction” among uniformed personnel due to its mandate of securing the country’s sovereignty and territory.
Unlike other uniformed services, Teodoro said, military personnel do not receive additional financial support from local government units.
He also pointed out that AFP personnel are governed by strict rules of military law from the moment they start training until retirement.
“The AFP continues to obtain the highest approval, satisfaction, and trust ratings. Adding to their burdens will only serve to distract them from focusing on their crucial mission,” he said.
Many former military personnel who have either long retired from the service or are now planning to retire from public service have been very anxious about the proposed changes to the pension system, he said.