President Ferdinand R. Marcos, Jr. is planning to reform the pension system for retired military and uniformed personnel (MUP) to avoid a "fiscal collapse" brought about by the COVID-19 outbreak.
According to Finance Secretary Benjamin E. Diokno, the current pension system is unsustainable with a P120-P130 billion budget for the program for this year alone.
"Right now, the situation is so bleak. For example, if you compare the current operating expenditures, the maintenance and operating expenditures of the whole AFP (Armed Forces of the Philippines) with the capital outlays… it is actually much less than the amount of pension that we are allocating for the retirees," Diokno said.
The pension program covers members of the Armed Forces of the Philippines, the Bureau of Fire Protection, the Bureau of Jail Management and Penology, the Philippine Coast Guard, the Philippine Public Safety College, the Bureau of Corrections, and the Philippine National Police.
Diokno identified problems with the current pension system, such as the notion that it is non-contributory, which means that retirement pensions and benefits are entirely funded by the national government through yearly allocations—with retirees do not contribute.
“So pension can be received after 20 years of service with no minimum pensionable age. Some of them they get recruited at the age of 20, so they can already retire at the age of 40, and you know how long their lives are. Military people live longer than us, some at the age of 90. So they retire at 40, they get their pension up to age 90, isn’t that ridiculous?” he added.
The new policy will apply to all active troops as well as new entrants, implying that mandatory payments will begin with those who are now or are about to enter duty.
It also seeks the elimination of automatic pension indexation to the income of active staff of comparable levels. This implies that pensions will no longer rise in line with active-duty pay increases.
Military uniformed soldiers will be eligible for retirement at the age of 57. The present policy permits them to begin receiving pensions at the obligatory retirement age of 56.
Meanwhile, active staff and recruits will be compelled to make mandatory contributions, analogous to the Government Service Insurance System, the pension system for government employees. The level of the necessary contribution will be phased throughout a uniformed personnel's years of service, beginning with 5% and eventually increasing to 9% of their income.
