The Department of Finance (DOF) assured the military and uniformed personnel (MUP) that the proposed pension reform would guarantee just compensation for their sacrifices in service to the nation.

In a statement, Finance Secretary Benjamin E. Diokno said the MUP pension reform, once passed into law, will ensure fair retirement benefits for men and women in service, while taking into account the government's financial resources.

“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,” Diokno said on Tuesday, Aug. 15.

Diokno reiterated the unsustainability of the existing MUP pension system and its potential to generate economic uncertainty.

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

In just the past few years, Diokno cited that the pension arrearages have reached P3.7 billion in 2021, P32.6 billion in 2022, and P5.2 billion this year. By 2024, they are projected to hit P4.8 billion.

"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,” Diokno said.

The DOF issued Diokno’s statement as the House of Representatives ad hoc committee held its first hearing on the military and uniformed personnel pension reform bill on Tuesday.

The aim is to design a pension system that takes into account the welfare of active military and uniformed personnel as well as retirees, while simultaneously ensuring its sustainability and resilience over time, Diokno said.

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

According to Diokno, one of the key reform proposals is the establishment of MUP Trust Funds, which will serve as the foundation for the pension system.

Under the DOF proposal, the pension funds will be financed through contributions from military and uniformed personnel, along with a corresponding government share, and further supplemented by the proceeds generated from the sale or lease of MUP assets.

Furthermore, Diokno reassured soldiers, policemen, and other uniformed personnel that despite the reform bill's requirement for their contributions, this arrangement is advantageous to them as it provides them with complete 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,” Diokno said.

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 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.