The Department of Finance (DOF) has vowed to resolve the complicated military and uniformed personnel (MUP) retirement and pension system that continues to take a heavy toll on the government’s yearly budget.

Finance Secretary Benjamin E. Diokno said on Wednesday, Nov. 23, that the MUP pension scheme remains a fiscal risk, which the national government cannot no longer afford to just ignore.

"That's the elephant in the room. I always say that. Right now, it is I think P120 billion in the current 2023 budget proposal and that would continue to balloon unless we will address that issue,” Diokno said during his confirmation hearing at the Senate.

Reforms in the MUP pension scheme was one of the proposals that the Duterte administration had wanted the Marcos administration to seriously consider.

According to the DOF, the the government was spending around P114 billion per year to fund the MUP pension, a hefty and unsustainable amount for the state with a ballooning debt load.

The current MUP pension system is non-contributory, hence retirement pensions and benefits are fully funded by the national government through annual appropriations.

Diokno said the Marcos administration wants the Government Service Insurance System (GSIS), a state-owned firm handling the pension of all government workers, to assume management of the MUP.

However, Diokno said the military and uniformed personnel funds should not commingle with GSIS’ existing coffers and should be contributory in nature, especially among new entrants.

“If the military pension will be covered by the GSIS... There will be civilian component and a military component,” the finance chief explained.

However, Diokno said “we have to respect what has already been committed to those who have retired. So, from now on after the military pension bill was passed, those who will enter, those who are in active service will contribute.”

Last July, Jose Arnulfo “Wick” Veloso, GSIS president and general manager, said pension fund was open to cooperate with the national government in instituting reforms in the MUP pension scheme.

According to a GSIS actuarial study, the current system entails a total funding requirement estimated at P9.6 trillion. This amount covers the future obligations pertaining to active members and current pensioners of the MUP.

If the current system prevails, the national government will be required to allocate around P850 billion to MUP pensions annually for the next 20 years.