Diokno tackles 'elephant in the room': Reforms in pension system for military
By Raymund Antonio and Raymund Antonio
Finance Secretary Benjamin Diokno is addressing what he described as “the elephant in the room”, referring to the much-needed reforms in the military and uniformed personnel (MUP) pension scheme, which is taxpayer-supported and receives no contribution from the retirees themselves.
During a Palace briefing, the Finance Chief said the “game-changing reform” has never been addressed by President Ferdinand “Bongbong” Marcos Jr.’s predecessors, and revealed that he had already met with Interior and Local Government Secretary Benjamin "Benhur" Abalos Jr. and Defense Secretary Carlito Galvez to discuss the matter.
“I said this is more complicated than the first topic because I told the President, ‘Your predecessors have decided to kick the can down the road; they don’t want to address this…’ I usually call this the ‘elephant in the room’ – nobody would like to touch it and they simply ignore it,” he told the media on Tuesday, March 28.
The Finance Chief discussed that the four-point proposal that he shared was already approved by Marcos.
Reforms to apply to active and new recruits
The first proposal is for the reform to apply “to all active personnel and new entrants.”
“So, once the new system is adopted, all those who are in active service and new recruits will have to pay their way, no longer free,” he said.
This came after also revealing that the MUP pension system is “unique” in such a way that it is appropriated in the annual national budget and that retirees don’t contribute to it.
Removal of automatic indexation
The official also said that the automatic indexation of pension to the salary of active personnel of similar ranks must be removed if the reforms are to take place.
Diokno explained that under the current pension system that is “fully funded” by the national government from taxpayers’ money, the monthly pension that retirees receive is “automatically indexed to the salary of the personnel of the same rank.”
“In other words, if you are retiree, if you are general getting ‘x’ amount of money, if the salary of the incumbent is doubled, you get your pension doubled also,” he said.
MUPs to start receiving pension at 57
The third proposal is for MUPs to receive their pension at 57 years old, and not automatically after 20 years of service.
The official said that some uniformed personnel can get recruited as early as 20 years old and retire after 20 years of service at 40 years old.
Because the pension scheme has no minimum pensionable age, the retirees could start receiving their pensions as early as 40 years old.
“Military people live longer than us. Some at the age of 90. So, they retire at 40, they get their pension up to age 90, isn’t that ridiculous?,” Diokno asked.
Mandatory contributions
The official stressed that under the proposed reforms, “mandatory contributions will be required for active personnel and new entrants similar to the GSIS (Government Service Insurance System) pensioners.”
Diokno lamented that the current system “is not sustainable,” and even discussed how “bleak” the current situation is.”
“I said if this goes on there will be a fiscal collapse,” he said after reporting that the MUP pension caused taxpayers P120 to P130 billion in the 2023 national budget.
He explained that the current operating expenditures or maintenance operating expenditures of the whole AFP and the capital outlays, which is the money used to buy aircrafts, “is actually much less than the amount of pension that we are allocating for the retirees.”
“So, there will come a time when the current budget will only be about one-third or one-fourth of the money that we are paying for the pensioners. So, we have to really address that issue,” Diokno added.
Right now, the average monthly pension of a military personnel is P40,000, while Social Security System (SSS) retirees get an average of P4,528 and GSIS beneficiaries receive P13,600 on average.
The pension fund covers the Armed Forces of the Philippines (AFP), the Bureau of Jail Management and Penology (BJMP), the Bureau of Fire Protection (BFP), the Philippine National Police (PNP), the Philippine Public Safety College, the Philippine Coast Guard (PCG), and the Bureau of Corrections (BuCor).