House panel approves bill seeking to reform military pension system
A HOUSE of Representatives ad hoc committee approved on Tuesday a consolidated bill that seeks to reform the military and uniformed personnel (MUP) pension system.
Albay Rep. Jose Maria Clemente S. Salceda, who is the chairman of the ad hoc committee on the MUP pension system, said the committee members agreed in principle on a substitute bill that is “amenable” to economic managers and the military and uniformed personnel.
“This is a win-win solution, because we are removing the risks of sudden spikes in pension liabilities while also ensuring that salaries and pensions increase at manageable levels,” he said.
Economic managers earlier warned the current MUP pension system is unsustainable and may trigger a “fiscal collapse.”
A copy of the approved bill was not made available as of press time.
Mr. Salceda in a statement said the measure would guarantee salary increases, pension indexation and funding sources for the MUP pension system.
Under the measure, all MUP would now be required to contribute to the pension fund. For active personnel, they would contribute 5% for the first three years, 7% for the following three years, and 9% thereafter. For new entrants, they would have to contribute 9% immediately, but “a larger government counterpart to complete 21% contribution,” Mr. Salceda said.
All MUP will also be guaranteed a 3% salary increase under the measure.
“For the past 25 years, the salaries have only increased for nine years, so this is also a win for the active personnel, who will get a salary increase every year for the next 10 years,” he said.
The retirement age for all MUP will now be fixed at 57, or after completing 30 years of satisfactory service.
Another key provision is the 90% maximum retirement package based on the base pay of all MUP, raising by 5% the previous package for Armed Forces of the Philippines (AFP) personnel.
The measure also includes Philippine National Police (PNP) personnel who leave with less than 20 years’ service in the list of those eligible for a lump sum separation pay.
Mr. Salceda said the bill will retain the indexation of pensions, which means MUP pensioners would be guaranteed an increase in pensions for 10 years. However, this would be capped at 50% of the salary increase.
The current policy where an MUP will be promoted to one rank higher upon retirement will also be maintained.
The measure will also create two separate pension management systems — one for the AFP and another for civilian uniformed personnel.
As part of the reform, there will be a periodic review of pension benefits and a possible increase of up to 1.5% per year, although this may depend on economic conditions and actuarial life of the pension fund.
Finance Secretary Benjamin E. Diokno said in a statement that the creation of the MUP trust funds is one of the key reform proposals. These will be funded through MUP contributions, with a corresponding government share, and supplemented by the proceeds from the sale or lease of MUP assets, he added.
“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,” Mr. Diokno said.
Mr. Salceda said the government contribution to the MUP fund may reach up to P70 billion.
“If we think about it, the government will contribute more to MUPs, with a counterpart of almost P70 billion. Every P1 that the MUPs will provide, the government will contribute P150,” he said in Filipino.
During the committee hearing on Tuesday, Deputy Treasurer Erwin D. Sta. Ana said the MUP pension system’s dependence on full government funding makes it “highly vulnerable to economic and fiscal downturns, leading to an unstable and an unreliable benefits system.”
The MUP pension reform bill is on the Legislative-Executive Development Advisory Council’s list of 20 priority measures that are targeted for approval by December. — Keisha B. Ta-asan
