Pension reform prioritizes welfare of military and uniformed personnel, ensures fiscal sustainability of pension system, DOF says

Finance Secretary Benjamin E. Diokno emphasized the urgent need for a pension reform bill to establish an adequate, fair, dignified, and financially sound pension system for soldiers, policemen, and other uniformed personnel.

“The core objective of the government’s efforts to reform the pension system for military and uniformed personnel is to address the unsustainability and uncertainty of the current pension system. Through these reforms, we can ensure the timely delivery of fair retirement benefits to men and women in service, while gradually lessening the strain on the government budget over time,” said Secretary Diokno in a statement on Tuesday.

The Finance chief issued the statement as the House of Representatives ad hoc committee holds its first hearing on the military and uniformed personnel pension reform bill today.

“The current MUP pension system’s dependence on full government funding exposes it to economic and fiscal downturns and compromises its stability and reliability,” Secretary Diokno said.

Pension arrearages in the past few years alone amounted to PHP 3.7 billion in 2021, PHP 32.6 billion in 2022, PHP 5.2 billion in 2023, with a projected PHP 4.8 billion for 2024.

“The goal is to craft a pension system that factors in the welfare of the military and uniformed personnel in active service and retirees, while making sure it is sustainable and can withstand the test of time,” Secretary Diokno said.

“The emerging consensus provides a framework that balances the welfare of MUPs and the fiscal health of the MUP pension system,” he emphasized.

The creation of the Military and Uniformed Personnel Trust Funds is one of the key reform proposals, according to the Finance Secretary.

“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,” he said.

These pension funds shall be funded through the military and uniformed personnel’s contributions, with a corresponding government share, and supplemented by the proceeds from the sale or lease of MUP assets, Secretary Diokno explained.

He also assured the soldiers, policemen, and other uniformed personnel that while the reform bill will 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 economic team is also exploring the possibility of introducing mitigating measures such as loan restructuring to ease the impact of mandatory contributions on personnel with heavy personal loans.

“The creation of a self-sustaining pension fund insulated from economic shocks and the budgetary process is key to ensuring that the State is able to honor its future promises to retirees and their dependents,” according to Secretary Diokno.

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 the active service to stay longer and ensure more experienced personnel are retained.

There shall also be a periodic review of pension benefits and a possible increase of up to 1.5 percent per year, subject to the evaluation of economic conditions and actuarial life of the pension fund, to keep up with inflation.

Secretary Diokno extends his gratitude to the House of Representatives for heeding the call of the economic team and further urges Congress to integrate these reforms into the substitute bill.

The economic team conducted a series of exhaustive consultations across the country from May to July 2023––30 roadshows and technical working group meetings in total––with the Armed Forces of the Philippines, Philippine National Police, Bureau of Fire Protection, Philippine Coast Guard, Bureau of Jail Management and Penology, Bureau of Corrections, and National Mapping and Resource Information Authority.