The Marcos Jr. administration is planning to implement reforms in the military and uniformed personnel (MUP) retirement and pension system to avoid a “fiscal collapse” caused by the COVID-19 pandemic.
In particular, the reforms would end automatic pensions for servicemen after 20 years in the service, and instead start their pension at 57 years old (a year after their mandatory retirement age), and pensioners would no longer receive payouts indexed to the salary of active personnel of single ranks.
The pension fund covers personnel of the Armed Forces of the Philippines, Bureau of Jail Management and Penology, Bureau of Fire Protection, Philippine National Police, Philippine Public Safety College, Philippine Coast Guard, and the Bureau of Corrections.
In a Palace press briefing, Finance Secretary Benjamin Diokno said President Ferdinand Marcos Jr. also expressed support for two other proposals:
• The reform to apply to all active personnel and new entrants; and
• Mandatory contributions will be required for active personnel and new entrants, similar to the Government Service Insurance System (GSIS) pensioners.
Diokno cited issues in the current pension system, such as how it is non-contributory—meaning retirement pensions and benefits are fully funded by the national government through annual appropriations despite having no contribution from the retirees.
Under the proposed new pension scheme, the Department of Finance chief said “all those who are in active service and the new recruits will have to pay.”
He said should these reforms take place, automatic indexation of pension to the salary of active personnel of similar ranks must be removed.
“The MUP pension is automatically indexed to the salary of the personnel of the same rank. In other words, if you are a retiree [and] if you are a general getting X amount of money, if the salary of the incumbent is doubled, you get your pension doubled also,” the Finance chief said.
Diokno said he also found it “ridiculous” that when military and uniformed personnel who choose to retire as early as 40 years old get pensions up to age 90.
“We have to really address that issue. It’s not sustainable. I said, if this goes on, there will be a fiscal collapse,” he said, describing reforms in the MUP system as “the elephant in the room.”
To date, Diokno said both Department of National Defense (DND) Secretary Carlito Galvez Jr. and Department of the Interior and Local Government (DILG) Secretary Benhur Abalos Jr. have agreed with all four proposals.
Asked how much military and uniformed personnel will be contributing to the new MUP pension system, the DOF chief said it will be a “gradual” contribution.
“For the first three years, their contribution is 5 percent of the salary and then the contribution of the national government (NG) will be 16 percent,” he said.
“And then for the next three years, it will be increased to 7 percent and then the NG share will decline to 14 percent…Years thereafter, the MUP share will be increased to 9 percent and NG 12 percent,” he added.
Diokno likewise expressed confidence that the military and uniformed personnel would not have issues with the new MUP system.
“In 2018, their salaries were doubled. That’s why their contribution was increased gradually from 5 to 7 to 9 percent. I think they understand that they have to cooperate with the rest of society, otherwise the government deficit will balloon,” he said.
Meanwhile, Diokno was also hopeful that the Marcos administration would succeed in pushing for the proposed reforms in the MUP retirement and pension system in Congress.
“I think President Marcos Jr. is in the best position to push through with this reform…Remember that he is the first President who was elected by a significant majority, 60 percent. So, he really has very strong support and he’s willing to spend his political capital for this because he can see that if we do not do this there will be a fiscal collapse in the future,” he said.
“Mr. Marcos also has a very strong control of both houses of Congress so it’s going to be less problematic for him to push forward such a major reform,” he added. With Charles Dantes