House approves military pension reform on second reading

RG Cruz, ABS-CBN News

Posted at Sep 19 2023 05:04 PM

ABS-CBN News/File
Members of various agencies prepare for participating in search and rescue operations in quake-hit Turkey at the Ninoy Aquino International Airport (NAIA) Terminal 3 in Pasay City on Feb. 8, 2023. Jonathan Cellona, ABS-CBN News/File

MANILA — The House of Representatives on Tuesday approved on second reading the proposed reform on the military and uniformed personnel's (MUP) pension system, which economic managers said is crucial in stabilizing the country's fiscal position. 

Finance Secretary Benjamin Diokno earlier said the current pension system, where the government shoulders the pension of MUPs, should be revisited since it could cause a "huge problem" in the future. Diokno said the liability due to the MUP pension was at P9 trillion as of May.

"The House today approved a comprehensive reform of the Military and Uniformed Personnel Pension System... The ball is now in the Senate's court, and my counterpart, Senator Jinggoy [Estrada], has also insisted on the need for a reform," said Ways and Means Committee Chair Joey Salceda of Albay.

"I am confident that this time, with the President's strong support and a consensus among the MUP, this reform will find its way to the President's desk, hopefully before the year ends," he said in a statement.

The body approved the measure with some amendments.

The key provisions accepted on the floor included the following: 

  • Full indexation, with a provision for adjustment during adverse fiscal conditions
  • Guaranteed salary increase of 3% per annum over 10 years 
  • Creation of two trust funds, one for the military which will infuse at least P44 billion in assets to the fund, and another for uniformed services
  • Uniform retirement benefits for total permanent disability
  • Assistance for indigent military retirees
  • Mandatory contribution of 9% of the salaries for new entrants, with a larger government counterpart of 12% and retirement of new entrants at rank last held 
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These satisfy the three demands of the House leadership, namely a salary increase, guaranteed funding sources, and pension increases, Salceda said. 

He said that for active and retired personnel, the structure of the pension system was preserved in full. 

"There is no longer any debate between the MUP agencies and the economic managers that we need this reform. There is also no debate that the military and uniformed personnel deserve some degree of retirement protection from the state they protect. This consensus bill hurdled the House because it is fiscally, politically, and morally acceptable," he said.

Under the current scheme, the pension of retired personnel increases by 100% when the "salary of the incumbent [personnel] is doubled," Diokno earlier noted. 

Uniformed personnel who have rendered at least 20 years of active service could also opt to retire.

This means that those who enter the service at 20 years old could be eligible for pension in their 40s, Diokno added.

Salceda said the reform would reduce the unfunded liabilities of the MUP pension system to P3.4 trillion from estimates of as high as P14 trillion. 

"I think a credit rating upgrade will follow its enactment," Salceda said. 

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