The proposed reform of the Military and Uniformed Personnel (MUP) pension system will only apply to new entrants in the service to ease the ballooning budget burden of the government, the Department of National Defense (DND) disclosed Monday, Oct. 18.
DND spokesperson Arsenio Andolong emphasized that the reform intends to create a "more financially sustainable" MUP pension system that would address the government's growing liabilities to the pensioners in the military and other uniformed services.
"While the versions in Congress and Senate have yet to be finalized, the reform intends to control the looming P9.6 trillion worth of unfunded pension liabilities, which may continue to grow if the current scheme prevails," Andolong said in a statement sent to reporters.
Lawmakers from the Senate and House of Representatives have filed their respective versions of the MUP pension reform bill.
According to the Government Service Insurance System (GSIS), the MUP pension system currently has a P9.6 trillion unfunded reserve deficit and a total of P848.39 billion is needed annually to sustain it for the next 20 years based on the existing scheme.
Under the current scheme, MUPs are not required to pay mandatory contributions for their pension unlike civilian government employees as it is being subisidized by the government through annual appropriations in the national budget. Civilian government employees have to contribute monthly to the GSIS, the state pension fund.
Department of Finance (DOF) Director Valery Joy Brion explained in a military-hosted radio interview that the Senate discussions on the proposed reform point to the creation of a dual pension structure which will "retain the present pension and retirement benefits system of currently active and retired personnel while applying the reform only to those who will enter the service upon the effectivity of the Act."
Some of the proposed changes include mandatory contributions to fund pensions, discontinuation of automatic indexation, computation of pension benefits at-rank upon retirement, adjustment of pensionable age, creation of an MUP Trust Fund Committee to oversee the MUP pension system, and designation of the GSIS as the administrator of the MUP pension system.
The DOF official also cited that the MUP pension reform seeks to "save" the pension system and is "crucial to post-pandemic fiscal and economic recovery."
DND Secretary Delfin Lorenzana earlier expressed support to the reform of the current MUP pension system, saying it will be "unsustainable in the near future" and "a huge burden to our taxpayers."